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NAFTA: A NEGATIVE IMPACT ON BLUE COLLAR, 
MINORITY, AND FEMALE EMPLOYMENT? 



Y 4. G 74/7: AM 3/5 

HftFTA: A Negative Inpact on Blue Co. 



HEAKING 

BEFORE THE 

EMPLOYMENT, HOUSING, AND AVIATION 
SUBCOMMITTEE 

OF THE 

COMMITTEE ON 

GOVERNMENT OPERATIONS 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRD CONGRESS 

FIRST SESSION 



NOVEMBER 10, 1993 



FMnted for the use of the Committee on Government Operations 




Ap K 1 9 f994 

sasaasKs 



U.S. GOVERNMENT PRINTING OFFICE 
75-934 CC WASHINGTON : 1994 

For sale by the U.S. Government Printing Office 
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 
ISBN 0-16-043587-0 



NAFTA: A NEGATIVE IMPACT ON BLUE COLLAR, 
MINORITY, AND FEMALE EMPLOYMENT? 



4.G 74/7: AH 3/5 

FTA: A Negative Inpact on Blue Co. 



HEARING 

BEFORE THE 

EMPLOYMENT, HOUSING, AND AVIATION 
SUBCOMMITTEE 

OF THE 

COMMITTEE ON 

GOVERNMENT OPERATIONS 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRD CONGRESS 

FIEST SESSION 



NOVEMBER 10, 1993 




Printed for the use of the Committee on Government Operations 

mm 

APR 1 9 1994 



U.S. GOVERNMENT PRINTING OFFICE 
75-934 CC WASHINGTON : 1994 

For sale by the U.S. Government Printing Office 
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 
ISBN 0-16-043587-0 



COMMITTEE ON GOVERNMENT OPERATIONS 



JOHN CONYERS, 
CARDISS COLLINS, Illinois 
GLENN ENGLISH, Oklahoma 
HENRY A. WAXMAN, California 
MIKE SYNAR, Oklahoma 
STEPHEN L. NEAL, North Carolina 
TOM LANTOS, California 
MAJOR R. OWENS, New York 
EDOLPHUS TOWNS, New York 
JOHN M. SPRATT, JR, South Carolina 
GARY A. CONDIT, California 
COLLIN C. PETERSON, Minnesota 
KAREN L. THURMAN, Florida 
BOBBY L. RUSH, Illinois 
CAROLYN B. MALONEY, New York 
THOMAS M. BARRETT, Wisconsin 
DONALD M. PAYNE, New Jersey 
FLOYD H. FLAKE, New York 
JAMES A. HAYES, Louisiana 
CRAIG A. WASHINGTON, Texas 
BARBARA-ROSE COLLINS, Michigan 
CORRINE BROWN, Florida 
MARJORIE MARGOLIES-MEZVINSKY, 

Pennsylvania 
LYNN C. WOOLSEY, California 
GENE GREEN, Texas 
BART STUPAK, Michigan 



JR., Michigan, Chairman 

WILLIAM F. CLINGER, JR., Pennsylvania 

AL McCANDLESS, California 

J. DENNIS HASTERT, Illinois 

JON L. KYL, Arizona 

CHRISTOPHER SHAYS, Connecticut 

STEVEN SCHIFF, New Mexico 

C. CHRISTOPHER COX, California 

CRAIG THOMAS, Wyoming 

ILEANA ROS-LEHTINEN, Florida 

DICK ZIMMER, New Jersey 

WILLIAM H. ZELIFF, JR., New Hampshire 

JOHN M. MCHUGH, New York 

STEPHEN HORN, California 

DEBORAH PRYCE, Ohio 

JOHN L. MICA, Florida 

ROB PORTMAN. Ohio 



BERNARD SANDERS, Vermont 
(Independent) 



JUUAN EPSTEIN, Staff Director 
Matthew R. Fletcher, Minority Staff Director 



Employment, Housing, and Aviation Subcommittee 

COLLIN C. PETERSON, Minnesota, Chairman 
TOM LANTOS, California WILLIAM H. ZELIFF, JR., New Hampshire 

BOBBY L. RUSH, Illinois CHRISTOPHER SHAYS, Connecticut 

FLOYD H. FLAKE, New York JOHN M. McHUGH, New York 

KAREN L. THURMAN, Florida 
BARBARA-ROSE COLLINS, Michigan 

Ex Officio 

JOHN CONYERS, Jr., Michigan WILLIAM F. CLINGER, JR., Pennsylvania 

DAVID C. Rinebold, Professional Staff Member 

Andrea Nelson, Counsel 

June Saxton, Clerk 

MICHAEL D. Nannini, Minority Professional Staff 



(ID 



CONTENTS 



Page 

Hearing held on November 10, 1993 1 

Statement of: 

Collins, Hon. Barbara-Rose, a Representative in Congress from the State 
of Michigan, and chairwoman, anti-NAFTA task force, Congressional 
Black Caucus 67 

Hinqjosa-Ojeda, Raul A., Ph.D., assistant professor of planning, Univer- 
sity of California 88 

Jackson, Jesse, president, National Rainbow Coalition 58 

Johnson, Gloria, president, Coalition of Labor Union Women 80 

Lee, Thea M., economist, Economic Policy Institute 82 

Malichi, Toby, president and managing director, Malichi Diversified, Ltd., 
Indianapolis, IN 118 

Nader, Ralph, Center for Responsive Law 23 

Peterson, Hon. Collin C, a Representative in Congress from the State 
of Minnesota, and chairman, Employment, Housing, and Aviation Sub- 
committee: Opening statement 1 

Letters, statements, etc., submitted for the record by: 

Collins, Hon. Barbara-Rose, a Representative in Congress from the State 
of Michigan, and chairwoman, anti-NAFTA task force, Congressional 
Black Caucus: Prepared statement 72 

Conyers, Hon. John, Jr., a Representative in Congress from the State 
of Michigan, and chairman, Committee on Government Operations: 
Prepared statement 7 

Hinqjosa-Ojeda, Raul A., Ph.D., assistant professor of planning, Univer- 
sity of California: Prepared statement 92 

Lee, Thea M., economist, Economic Policy Institute: Prepared statement .. 85 

Malichi, Toby, president and managing director, Malichi Diversified, Ltd., 
Indianapolis, IN: Prepared statement 121 

Moore, Michael, producer, writer, director, and creator of the film "Roger 
and Me": Prepared statement 69 

Nader, Ralph, Center for Responsive Law: 

Information concerning expanding trade and creating American jobs . 30 
Prepared statement 44 

Peterson, Hon. Collin C, a Representative in Congress from the State 
of Minnesota, and chairman, Employment, Housing, and Aviation Sub- 
committee: Prepared statement 4 

Zeliff, Hon. William H., Jr., a Representative in Congress from the State 
of New Hampshire: Prepared statement 15 

APPENDDC 
Material submitted for the hearing record 127 



(III) 



NAFTA: A NEGATIVE IMPACT ON BLUE 
COLLAR, MINORITY, AND FEMALE 
EMPLOYMENT? 



WEDNESDAY, NOVEMBER 10, 1993 

House of Representatives, 
Employment, Housing, and Aviation Subcommittee 

of the Committee on Government Operations, 

Washington, DC. 
The subcommittee met, pursuant to notice, at 2:09 p.m., in room 
2154, Rayburn House Office Building, Hon. Collin C. Peterson 
(chairman of the subcommittee) presiding. 

Present: Representatives Collin C. Peterson, Karen L. Thurman, 
Christopher Shays, and William H. Zeliff, Jr. 
Also present: Representative John Conyers, Jr. 
Staff present: David C. Rinebold, professional staff member; An- 
drea Nelson, counsel; June Saxton, clerk; and Michael D. Nannini, 
minority professional staff, Committee on Government Operations. 

OPENING STATEMENT OF CHAIRMAN PETERSON 

Mr. Peterson. The subcommittee will come to order. 

This is a hearing today that is going to focus on potential im- 
pacts of NAFTA as regards minorities, women, and blue collar 
workers. 

In the past several months, the Subcommittee on Employment, 
Housing, and Aviation has held eight hearings on the impacts of 
the proposed North American Free Trade Agreement. What we 
found during those eight hearings is disturbing. 

This agreement, in my opinion, does nothing for American work- 
ers. So-called projections of net job gains, which are cited as abso- 
lute truth by NAFTA proponents, are based on economic studies 
that I believe are questionable at best. These are the same econo- 
mists who projected 2 million new jobs from previous trade agree- 
ments that actually ended up in Japan, Europe, and other places. 

They have, in my opinion, about the same credibility as pre- 
dictions from the local TV weatherman. And even though multi- 
national corporations now move millions of dollars from country to 
country, most of the 300 economists who support NAFTA rely on 
models that assume no movement of capital and full employment 
in both Mexico and the United States. 

The job training program promised for trade dislocated workers 
will likely be inadequate as well. For 19 years, these programs 
have been a failure because they did not result in good, new jobs, 
for the workers that were dislocated. The General Accounting Of- 

(l) 



fice and the Department of Labor IG openly acknowledge this. But 
it is the only help promised currently for our vulnerable workers 
by this administration. 

Promises that NAFTA would raise the low Mexican wages looked 
hollow after our review of the exercise of labor rights in Mexico. 
Unions in Mexico, as everybody knows, are an arm of the govern- 
ment and carry out government economic policies. The current pol- 
icy is to keep wages low and hours high so that foreign companies 
will be induced to move facilities to Mexico. We see no change in 
that with the current agreement. 

In Matamoros, for example, maquiladora workers are better paid 
and work only a 40-hour week, as opposed to the 48-hour week 
that is standard. But now Mexico is promising United States com- 
panies new workers for $1 an hour instead of $2 an hour and work- 
ing a 48-hour week instead of a 40-hour week. 

During this committee's visit to Mexico, the manager of a state- 
of-the-art GM subsidiary told us that the company moved to Mata- 
moros because of the lower wages which gave them a competitive 
edge. 

Workers who try to organize independent unions to fight for their 
rights are fired, black listed, physically abused, and sometimes 
killed by government and union-sponsored thugs. 

The NAFTA labor side agreement, in my opinion, does nothing 
to change this situation. It does not protect worker rights to orga- 
nize ana to collectively bargain. NAFTA proponents use this omis- 
sion as a selling point. 

United States and Canadian workers cannot even discuss work- 
ing conditions and labor rights with Mexican workers without risk- 
ing detention by immigration authorities who view free speech and 
the right to travel as a threat to Mexico's control of its workers. 

Thirty-eight United States and Canadian members of the ma- 
chinists' union learned that when they were detained in Tijuana for 
several hours in September because they happened to be on a 
street where a United States-owned plant with labor problems is 
located. 

NAFTA will be devastating for the 25 percent of the Mexicans 
who are engaged in agriculture. There are not enough other jobs 
to absorb the millions of Mexicans who will be displaced, and even 
then economists admit that the immigration to the United States 
will probably increase. The result? More downward pressure on 
U.S. wages. 

This hearing will focus special attention on the potentially dis- 
proportionate impact of projected layoffs and plant closings caused 
by NAFTA on minority and female workers. These are the same 
workers who have been the target of a variety of Federal programs 
designed to bring them into the economic mainstream. 

The decline in the number of manufacturing, blue collar jobs is 
well documented. NAFTA, in my opinion, will worsen this trend. 
Over 30 percent of the African-Americans in the work force are em- 
ployed in manufacturing jobs, compared to 20 percent of the white 
labor force. But, as the Wall Street Journal recently reported, Afri- 
can-American workers are disproportionately affected when blue 
collar jobs are lost, particularly when inner-city offices and fac- 
tories are closed. 



Dislocated workers experience much longer periods of unemploy- 
ment than other laid-off workers. And we also know that African- 
Americans and Hispanics already have unemployment rates twice 
as high as those of other workers. We know that women in the 
work force are often stuck in low-wage jobs that have fewer bene- 
fits. And programs have been put in place by the Federal Govern- 
ment to cfeal with these problems, but largely they have not suc- 
ceeded, at least up to this point. 

The industries most hkely to move south of the border are those 
which are the most labor intensive: Textiles, sewing, and auto 
manufacturing. These are exactly the jobs which minorities and 
women have been able to land. These are the jobs that single moth- 
ers have turned to to feed their children. In addition, procurement 
programs designed to provide a preference for minorities, and 
women may well be undermined by NAFTA. 

I, for one, will not support a trade agreement which protects in- 
vestors, bankers, lawyers, and economists, but not those who punch 
a time clock. 

I cannot support a trade agreement which will eliminate the very 
jobs that have enabled minorities and women to enter the economic 
mainstream. 

I would like to recognize Representative Conyers, the chairman 
of the Government Operations Committee, who has joined us today. 
And I am going to run over and vote. 

Mr. Chairman, I will get back as soon as I can. 

[The prepared statement of Mr. Peterson follows:] 



STATEMENT OF COLLIN C. PETERSON 

CHAIRMAN 

EMPLOYMENT, HOUSING AMD AVIATION SUBCOMMITTEE 

November 10, 1993 

In the past several months, the Subcommittee on Employment, 
Housing and Aviation has held eight hearings on the impacts of the 
proposed North American Free Trade Agreement (NAFTA) . 

what we found is very disturbing. This agreement does nothing 
for American workers. So-called projections of net job gains — 
which are cited as absolute truth by NAFTA proponents — are based 
on economic studies that are questionable at best. These are the 
same economists who projected 2 million new jobs from previous 
trade agreements with Canada and Japan. They have a credibility 
factor lower than the predictions of TV weathermen. Even though 
multinational corporations now move billions of dollars from 
country to country, most of the 300 economists who support NAFTA 
rely on models that assume no movement of capital and full 
employment in both Mexico and the U.S. 

The job training program promised for trade-dislocated workers 
will likely be inadequate. For 19 years, these programs have been 
a failure because they did not result in good, new jobs for these 
workers. The General Accounting Office and the Department of Labor 
openly acknowledge this. But it is the only help promised our most 
vulnerable workers. 

Promises that NAFTA would raise the low Mexican wages looked 
hollow after our review of the exercise of labor rights in Mexico. 
Unions in Mexico are an arm of the government and carry out 
government economic policies. The current policy is to keep wages 
low and hours high so that foreign companies will be induced to 
move facilities to Mexico. We see no change. In Matamoros, for 
example, maquiladora workers are better paid and work only a 40- 
hour week as opposed to the 4 8 -hour week that is standard. But now 
Mexico is promising U.S. companies new workers for $1 per hour, 
instead of $2, and working a 48-hour week. During this Committee's 
visit to Mexico, the manager of a state-of-the-art GM subsidiary 
told us that the company moved to Matamoros because of the lower 
wages, which gave them a "competitive edge." 

Workers who try to organize independent unions to fight for 
their rights are fired, blacklisted, physically abused and 
sometimes killed by government and union-sponsored thugs. The 
NAFTA labor side agreement does nothing to change this situation. 
It does not protect workers' rights to organize and collectively 
bargain. NAFTA proponents use this omission as a selling point. 

U.S. and Canadian workers cannot even discuss working 
conditions and labor rights with Mexican workers without risking 
detention by immigration authorities who view free speech and the 



right to travel as a threat to Mexico's control of its workers. 
Thirty-eight U.S. and Canadian members of the machinists' union 
learned that when they were detained in Tijuana for several hours 
in September because they happened to be on a street where a U.S.- 
owned plant with labor problems is located. 

NAFTA will be devastating for the 25 percent of Mexicans who 
are engaged in agriculture. There are not enough other jobs to 
absorb the millions of Mexicans who will be displaced, and even 
then economists admit that immigration to the U.S. will increase. 
The result? More downward pressure on U.S. wages. 

This hearing will focus special attention on the potentially 
disproportionate impact of projected layoffs and plant closings 
caused by NAFTA on minority and female workers. These are the same 
workers who have been the target of a variety of federal programs 
designed to bring them into the economic mainstream. 

The decline in the number of manufacturing/blue collar jobs 
is well documented. NAFTA will worsen this trend. Over 30 percent 
of the African-Americans in the workforce are employed in 
manufacturing jobs, compared to 20 percent of the white labor 
force. But, as the Wall Street Journal recently reported, African- 
American workers are disproportionately affected when blue-collar 
jobs are lost, particularly when inner-city offices and factories 
are closed. 

Dislocated workers experience much longer periods of 
unemployment than other laid-off workers. We also know that 
African-Americans and Hispanics already have unemployment rates 
twice as high as whites. He know that women in the workforce are 
often stuck in employment ghettos of their own, with lower wages 
and fewer benefits. Programs put in place by the federal 
government to deal with these problems have not succeeded. 

The industries most likely to move south of the border are 
those which are most labor intensive — textiles, sewing, and auto 
manufacturing. These are exactly the jobs which minorities and 
women have been able to land. These are the jobs that single 
mothers have turned to to feed their children. In addition, 
procurement programs designed to provide a preference for 
minorities and women may well be undermined by NAFTA. 

I, for one, cannot support a trade agreement which protects 
investors, bankers, lawyers and economists, but not those who punch 
a time clock. I cannot support a trade agreement which will 
eliminate the very jobs that have enabled minorities and women to 
enter the economic mainstream. 



Mr. Conyers [presiding]. All right. Thank you very much, Chair- 
man Peterson. We have agreed to rotate our assignments here 
chairing. And I am going to let Bill Zeliff go so that we can get this 
part of it out so when the voting discontinues we will be able to 
start off with the witnesses. 

And so I am very pleased to recognize my colleague, who accom- 
panied this CODEL that went to Mexico and parts of Texas; and 
we were very delighted that the gentleman from New Hampshire 
was able to accompany us. 

I am very pleased to recognize him, as the ranking member of 
this subcommittee now. 

[The prepared statement of Mr. Conyers follows:] 



OPENING STATEMENT 

HONORABLE JOHN CONYERS, JR. 

CHAIRMAN 

COMMITTEE ON GOVERNMENT OPERATIONS 

BEFORE 

EMPLOYMENT, HOUSING AND AVIATION SUBCOMMITTEE 



'NAFTA: A NEGATIVE IMPACT ON BLUE COLLAR 
MINORITY AND FEMALE EMPLOYMENT" 



NOVEMBER 10, 1993 



8 



I WANT TO THANK THE SUBCOMMITTEE'S DISTINGUISHED CHAIR, 
REPRESENTATIVE COLLIN PETERSON. FOR CONVENING THIS HEARING 
TO CONSIDER THE EFFECTS OF THE NORTH AMERICAN FREE TRADE 
AGREEMENT ON BLUE COLLAR WORKERS, WOMEN AND MINORITIES. 
THIS IS THE LAST HEARING THE GOVERNMENT OPERATIONS 
COMMITTEE WILL HOLD ON NAFTA PRIOR TO THE SCHEDULED VOTE 
ON THE IMPLEMENTING LEGISLATION. I AM GLAD WE WILL HAVE 
THE OPPORTUNITY TO CONSIDER THIS VERY IMPORTANT ISSUE AND 
HAVE DETERMINED THAT THERE IS GOOD CAUSE TO GO FORWARD 
WITH LESS THAN A WEEK'S NOTICE. 

WE CAN SEE BY THE COUNTLESS HEARINGS, THE TOWNMEETINGS 
THROUGHOUT THE UNITED STATES, THE TELEVISED FACE-OFF 
BETWEEN THE VICE PRESIDENT AND ROSS PEROT LAST NIGHT, AND 
THE FACT THAT REVEREND JESSE JACKSON, RALPH NADER, ROSS 
PEROT AND PAT BUCHANAN ARE ALL ON THE SAME SIDE, THAT THE 
DEBATE ON NAFTA HAS FUNDAMENTALLY ALTERED HOW TRADE 
POLICY IS DISCUSSED IN THE UNITED STATES. 

TRADE POLICY ISSUES, WHICH WERE ONCE DECIDED IN SECRET 
AMONG HIGH GOVERNMENT OFFICIALS AND INTERNATIONAL 
CONGLOMERATES, ARE NOW DISCUSSED AT THE DINNER TABLES, 



AND IN THE FACTORIES. PEOPLE REALIZE THAT THE COMMERCIAL 
RELATIONSHIPS WE ENGINEER WITH OTHER NATIONS EFFECT IN A 
VERY REAL AND DIRECT WAY, THEIR ABILITY TO HOLD JOBS AND 
PROVIDE FOR THEIR FAMILIES. 

WHATEVER ONE'S POSITION ON NAFTA, EVERYONE MUST KNOW 
THAT THOSE MOST LIKELY TO SUFFER WILL BE THOSE THAT 
HISTORICALLY ARE THE FIRST TO FACE ECONOMIC HARDSHIP IN 
THIS COUNTRY - AFRICAN-AMERICANS AND OTHER MINORITIES, THE 
POOR, LOW-SKILLED WORKERS, AND WOMEN. 

I AM DEEPLY CONCERNED WHEN I HEAR THE SUPPORTERS OF NAFTA 
TALK ABOUT THE LONG-TERM NET ECONOMIC BENEFIT OF THIS 
TRADE POLICY. EVERYONE KNOWS WHAT IT MEANS WHEN YOU 
TALK ABOUT A NET BENEFIT -- IT MEANS THAT THERE ARE 
WINNERS, AND LOSERS. FROM THE POINT OF VIEW OF THE DIRECT 
BENEFICIARIES OF THIS AGREEMENT, IF THE WINNERS OUTWEIGH 
THE LOSERS, THEN EVERYONE SHOULD APPLAUD. THAT'S A NET 
BENEFIT. WE ARE HERE THIS AFTERNOON TO CONSIDER THE 
CONSEQUENCES FOR THOSE LIKELY TO GET THE SHORT END OF THE 
STICK. 



10 



SERIOUS CONCERNS HAVE BEEN RAISED REGARDING THE 
LIKELIHOOD OF NAFTA TO FURTHER DECIMATE THE WELL-PAYING 
MANUFACTURING JOBS THAT HAVE BEEN THE FOUNDATION OF 
MIDDLE-INCOME URBAN COMMUNITIES; JOBS THAT HAVE BUILT 
CITIES LIKE DETROIT. NUMEROUS STUDIES SHOW THAT BLUE- 
COLLAR AND MINORITY WORKERS ARE DISPROPORTIONATELY 
CONCENTRATED IN MANUFACTURING INDUSTRIES AND LIVE IN 
URBAN AREAS THAT ARE SUPPORTED BY INCOME FROM THOSE 
INDUSTRIES. WITHOUT QUESTION, THEY WILL BE THE HARDEST HIT 
BY NAFTA AND WILL HAVE THE LONGEST AND MOST DIFFICULT 
RECOVERY. 

PRO-NAFTA FORCES PROMISE THAT NAFTA WILL ULTIMATELY 
CREATE THOUSANDS OF HIGH-SKILL, HIGH-WAGE JOBS THROUGH 
INCREASED EXPORTS TO MEXICO. EVEN IF THIS PROMISE COULD BE 
SUPPORTED WITH REAL EVIDENCE, THIS POLICY WILL STILL 
DISPLACE MANY WORKERS WHO WILL FACE SIGNIFICANT 
DIFFICULTIES MOVING INTO THESE NEW TECHNOLOGY-INTENSIVE 
JOBS. TO THEM, NAFTA IS A RAW DEAL. 



11 



EVEN IF WORKER ADJUSTMENT AND RETRAINING PROGRAMS ARE 
MADE AVAILABLE. THERE ARE SERIOUS QUESTIONS ABOUT 
WHETHER THE EXCHANGE OF HIGH-SKILL / HIGH-WAGE JOBS FOR 
LOW-SKILL / LOW WAGE JOBS WILL MATERIALIZE FOR BLUE-COLLAR 
WORKERS, MINORITIES AND WOMEN. IN A SERIES OF STUDIES 
CONDUCTED BY THE BUREAU OF LABOR STATISTICS (1979 
THROUGH 1990) U.S. WORKERS DISPLACED BY TRADE POLICIES 
WERE SHOWN AS MORE LIKELY TO MOVE DOWN THE JOB LADDER 
TO LOWER PAYING JOBS, OR OFF THE LADDER TO LONG-TERM OR 
PERMANENT UNEMPLOYMENT, NOT UP THE LADDER TO BETTER 
JOBS THAN THEY STARTED WITH. 

I BELIEVE THAT THE ADMINISTRATION WANTS TO PUT IN PLACE 
EFFECTIVE WORKER ADJUSTMENT AND JOBS TRAINING PROGRAMS. 
HOWEVER, I AM CONCERNED THAT THE PROPOSED PROGRAMS DO 
NOT FULLY TAKE INTO ACCOUNT THE UNIQUE PROBLEMS THAT WILL 
BE PRESENTED HERE. 

WITH THE ASSISTANCE OF THE ADMINISTRATION, THE COMMITTEE 
HAS DEVELOPED PROVISIONS IN NAFTA'S IMPLEMENTING 
LEGISLATION THAT WILL PROTECT MINORITY BUSINESS PROGRAMS. 
THE INCLUSION OF THESE PROTECTIONS IN AN INTERNATIONAL 



5 



12 



TRADE AGREEMENT IS UNPRECEDENTED. I HAVE RECEIVED FROM 
AMBASSADOR KANTOR A LETTER THAT LISTS THE FEDERAL 
PROCUREMENT LAWS THAT WILL BE PRESERVED BY THIS ACTION. 
THIS LETTER WILL BE ENTERED INTO THE RECORD. 

HOWEVER, DESPITE THIS ACHIEVEMENT, AND MY BELIEF IN THE 
GOODWILL OF THIS ADMINISTRATION, THE ECONOMIC BENEFITS OF 
NAFTA WILL NOT BE SHARED BY ALL. AND THOSE THAT WILL BE 
PENALIZED ARE TOO OFTEN THOSE THAT ARE ASKED TO ENDURE 
THE SACRIFICE FOR THE BENEFIT OF OTHERS. 

EVEN WORSE, THERE IS A FINAL IRONY. ALTHOUGH THE 
AGGREGATE PURCHASING POWER OF AFRICAN-AMERICANS IS 
ROUGHLY EQUAL TO THAT OF MEXICO, AS A COMMUNITY OF 
CONSUMERS, AFRICAN-AMERICANS HAVE NEVER SEEN THIS KIND OF 
VIGOR AND COMMITMENT ON THE PART OF THE U.S. GOVERNMENT 
AND U.S. CORPORATIONS THAT WE HAVE WITNESSED OVER NAFTA. 
UNTIL ALL OF US CAN SHARE IN THIS COMMITMENT TO ECONOMIC 
GROWTH, IT IS UNREASONABLE TO EXPECT SUPPORT FROM THOSE 
WHO ARE EXCLUDED. 

I LOOK FORWARD TO THE TESTIMONY WE WILL RECEIVE HERE. 



6 



13 

Mr. Zeliff. Thank you, Mr. Chairman. It was a great honor for 
me to participate in that trip during the October weekend. 

Mr. Chairman, for me, NAFTA represents opportunity. When a 
foreign country lowers its barriers to American-made products and 
services, this translates into opportunities for American workers. 

And that is what this country was founded upon, wasn't it? Op- 
portunity? That all men and women, regardless of race or ethnic 
origin, have the opportunity to realize their goals and dreams for 
the future? 

NAFTA is all about opportunity. We will have a historic oppor- 
tunity next Wednesday. We have the opportunity to create the 
world's largest trading block, able to compete with the best that 
Asia or the European Community can offer. 

We have the opportunity to gain new access to a growing market 
in Mexico, a market that prefers to buy American-made products. 

Businesses in this country will have new opportunities to market 
and sell their products and services. And this means more jobs for 
American workers. 

We can take the first step next week toward this goal by passing 
the North American Free Trade Agreement. We can move forward 
to secure our economic future, or we can build walls around our- 
selves and retreat into the failed protectionist policies of the past. 

I find it strange to see advocates for the poor worshiping Smoot- 
Hawley-type tariffs that caused the Great Depression. 

I oppose the tariffs of the past, and I agree with the need for job 
creating change, supported by all six living Presidents, both Repub- 
licans and Democrats, 41 Governors from both parties, and 17 lib- 
eral and conservative Nobel Prize winning economists. 

Professor Paul Krugman of MIT made an important observation 
in the December 1993 issue of Foreign Affairs stating, 

If the U.S. rejects NAFTA, it will virtually be asking for a return to the bad old 
days in U.S. -Mexican relations. ... It will be a monument to our foolishness if our 
wholly irrational fears about NAFTA end up producing an alienated or even hostile 
neighbor on our southern border. 

Unfortunately, the debate over NAFTA has been marked by a 
great deal of irrational fear and emotion interrupted, only occasion- 
ally, by the facts. 

Mr. Chairman, I relish the opportunity to work with you to ex- 
amine the issues surrounding the debate over NAFTA. You and I 
are on opposite sides of the NAFTA debate, but I certainly respect 
your views. I would like to believe that you also respect my desire 
to have the opportunity to present my views on this issue as well. 

As I mentioned in the past, I am sorry that no serious attempt 
was made to find any witnesses that might balance the testimony 
of those opposed to NAFTA. 

I am particularly disappointed that no serious attempt was made 
to secure the participation of the administration. 

Mr. Chairman, we have talked about these concerns before. And 
when I refer to "Mr. Chairman," I am referring to Chairman Collin 
Peterson particularly. I want our hearings to be objective and bal- 
anced examinations of the issues. 

Quite honestly, I am very interested and very impressed by the 
witnesses that will be appearing here today, both Reverend Jack- 



14 

son's and Mr. Nader's views on this job creating agreement. I am 
looking forward to their testimony. 

I, for one, believe strongly that the best way to create good, high- 
paying jobs for blue collar, minority, female, or other workers is to 
develop markets for the products of American companies. 

I, for one, believe strongly that government can best help the less 
fortunate in our society By enacting policies such as NAFTA that 
will create jobs. We can demagog at the altar of the past and sow 
fear, or we can bring change ana stimulate economic growth by en- 
acting the North American Free Trade Agreement. 

As Lee Iaccoca says, America should not be building walls 
around ourselves when the rest of the world is tearing down their 
walls. 

I, for one, agree with another friend of America's working men 
and women, former Speaker of the House, Tip CNeil, who stated, 

I always tried to live by the principle that my central duty was to represent the 
bread and butter economic interests of working men and women. It is because I care 
about the creation of jobs and the expansion 01 the middle class of this country that 
I strongly support the North American Free Trade Agreement. 

I would like to associate myself with Tip O'Neil's comments on 
how to best help working Americans. 

I would also like to just mention that the major chambers of com- 
merce of both Portsmouth and Manchester, NH, 2,500 members 
strong, have supported the passage of the North American Free 
Trade Agreement, as well as our business and industry association. 

Thank you, Mr. Chairman. I look forward to this great hearing. 

[The prepared statement of Mr. Zel iff follows:] 



15 



STATEMENT OF THE HONORABLE 

WILLIAM H. ZELIFF 

BEFORE THE SUBCOMMITTEE ON 

EMPLOYMENT, HOUSING, AND AVIATION 

ON THE IMPACT OF NAFTA ON 

BLUE COLLAR, MINORITY AND FEMALE EMPLOYMENT 

November 10, 1993 

Mr. Chairman, 

For me, NAFTA represents opportunity. 
When a foreign country lowers its barriers to 
American-made products and services, this 
translates into opportunities for American 
workers. 



16 

And that is what this country was founded 
upon, wasn't it? Opportunity? That all men 
and women, regardless of race or ethnic 
origin, have the opportunity realize their 
goals and dreams for the future? 

NAFTA is all about opportunity. We will 
have an historic opportunity next Wednesday. 
We have the opportunity to create the world's 
largest trading bloc, able to compete with the 
best that Asia or' European Community can 
offer. We have the opportunity to gain new 
access to a growing market in Mexico, a 
market that prefers to buy American-made 
products. Businesses in this country will 
have new opportunities to market and sell 
their products and services. 



17 

And this means more jobs for American 
workers. 

We can take the first step next week toward 
this goal by passing NAFTA. We can move 
forward to secure our economic future, or we 
can build walls around ourselves and retreat 
into the failed protectionist policies of the 
past. I find it strange to see advocates for 
the poor worshiping Smoot-Hawley type 
tariffs that caused the Great Depression. 

I oppose the tariffs of the past and agree with 
the need for job creating change, supported 
by all of the living Presidents, forty-one 
governors from both parties, and seventeen 
liberal and conservative Nobel Prize winning 
economists. 



18 

Professor Paul Krugman of MIT made an 
important observation in the December 1993 
issue of Foreign Affairs , stating that "if the 
US rejects NAFTA, it will virtually be asking 
for a return to the bad old days of US- 
Mexican relations... It will be a monument to 
our foolishness if our wholly irrational fears 
about NAFTA end up producing an alienated 
or even hostile neighbor on our southern 
border". 

Unfortunately, the debate over NAFTA has 
been marked by a great deal of irrational fear 
and emotion interrupted, only occasionally, 
by the facts. 



19 

Mr. Chairman, I relish the opportunity to 
work with you to examine the issues 
surrounding the debate over NAFTA. You 
and I are on opposite sides of the NAFTA 
debate, but I respect your views. I would 
like to believe that you respect my desire to 
have the opportunity to present my views on 
this issue as well. 

I am sorry that no serious attempt was made 
to find any witnesses that might balance the 
testimony of those opposed to NAFTA. I am 
disappointed that no serious attempt was 
made to secure the participation of the 
Administration. 



20 

Mr. Chairman, we have talked about these 
concerns before. I want our hearings to be 
objective and balanced examinations of 
issues. We do a disservice to the American 
people by doing anything less. 

Quite honestly, I am very interested to hear 
the Reverend Jackson's and Mr. Nader's 
views on this job creating trade agreement. 

I for one believe strongly that the best way to 
create good, high paying jobs for blue collar, 
minority, female, or other workers is to 
develop markets for the products of American 
companies. 



21 

I for one believe strongly that government 
can best help the less fortunate in our society 
by enacting policies such as NAFTA to create 
jobs. We can demagogue at the alter of the 
past and sow fear, or we can bring change 
and stimulate economic growth by enacting 
NAFTA. As Lee Iaccoca says, America 
should not be building walls around ourselves 
when the rest of the world is tearing down 
their walls. 

I for one agree with another friend of 
America's working men and women, former 
Speaker of the House Tip O'Neil, who stated, 
"I always tried to live by the principal that 
my central duty was to represent the bread- 
and-butter economic interests of working men 
and women. 



22 

It is because I care about the creation of jobs 
and the expansion of the middle class of this 
country that I strongly support the North 
American Free Trade Agreement." 

I'd like to associate myself with Tip O' Neil's 
comments on how to best help working 
Americans. Thank you Mr Chairman. 



23 

Mr. Conyers. Thank you. Bill Zeliff, you are a gentleman and a 
scholar. I appreciate your company on this committee. And I appre- 
ciated your traveling with me to Mexico. 

We are going to begin in just a few minutes, but we will stand 
in recess until this vote is completed and that will give your chair- 
man a chance to vote on the Brady bill amendment. 

[Recess taken.] 

Mr. Conyers. The committee will come to order. 

We are delighted to call Ralph Nader to the podium. He is prob- 
ably the most effective consumer crusader and public defender in 
our history. He has spent decades in the struggle against corporate 
and governmental abuse. He has become, in effect, the public citi- 
zen for American politics. 

We are pleased to have him here today. His impact on the sys- 
tem has been enduring. It goes back to the 1960's. His concerns 
with the environment, justice, economic concerns are well-known to 
all of us here in the Congress. And we are delighted to hear from 
him on this very important subject at this time. 

His prepared statement, as those of all witnesses, will be in- 
cluded in the record without objection. 

We also note the seating of Rev. Jesse Louis Jackson at the table 
next to Ralph Nader. We welcome you, too, Reverend Jackson; and 
we will hear from you shortly. 

Good afternoon, Mr. Nader. 

STATEMENT OF RALPH NADER, CENTER FOR RESPONSIVE 

LAW 

Mr. Nader. Thank you, Mr. Chairman and members of the sub- 
committee. Thank you for the opportunity to discuss the North 
American Free Trade Agreement. 

And this is the free trade agreement, a two volume document 
that most of the economists and most of the political figures which 
are lined up for NAFTA have never read, including Paul Samuel- 
son and Milton Friedman. 

I am glad to have this opportunity to reflect the results of many 
months of research by our organizations and reflect the points re- 
garding the North American Free Trade Agreement that are con- 
cerning millions of Americans who are part of coalitions all over 
the country urging the Congress to defeat this trade agreement. 

I request, with the permission of the committee, that my entire 
statement and its attachments be made part of the record. 

Mr. Conyers. It has been. 

Mr. Nader. The North American Free Trade Agreement, as it is 
called by its creators, is not a trade agreement in any traditional 
sense. And I want to make that clear in the context of Congress- 
man Zeliff s remarks. 

We are not talking about reinstating Smoot-Hawley; we are not 
talking about protectionism. The issue is not "free trade or not free 
trade. The issue is whether the NAFTA agreement diminishes 
American democracy and entrenches the Mexican dictatorial re- 
gime. Everything flows from that in terms of what will be the re- 
sult for our country, Canada, and Mexico under the North Amer- 
ican Free Trade Agreement which, as we all know, is only a prel- 



24 

ude to similar gigantic revisions of the General Agreement on Tar- 
iffs and Trade. 

NAFTA is much more than simply reducing tariffs or investment 
barriers. It is an international autocratic governance agreement 
that deeply invades the internal democratic sovereignty of the 
United States to preserve, in advance, its own health, safety, and 
workplace standards. 

NAFTA will undermine U.S. and State health safety and envi- 
ronmental standards by requiring harmonization of standards. 
That means, for our country, harmonization down. Our truck safety 
standards and truck driver certification standards will be under ex- 
ceptional pressure to go down toward lower levels in foreign coun- 
tries who are signatories to the NAFTA agreement. 

I will elaborate on that a little later on. 

Two, imposing limitations on the goals the United States may 

gursue in its food safety laws; three, limiting the means the United 
tates may use to promote health, safety, and environmental goals; 
and, four, requiring the United States to permit imports that don't 
comply with its health, safety, and environmental standards or face 
trade penalties; and, five, the establishment under NAFTA of se- 
cret tribunals — they are confidential tribunals — for resolving trade 
challenges, including those directed at health, safety, and environ- 
mental measures, that is stacked against consumer and environ- 
mental interests. 

And by that, I mean not just the general environment, but the 
workplace environment. 

According to many knowledgeable observers, the disproportionate 
impact on African- Americans and other minorities is quite signifi- 
cant. 

I would like to point out, Mr. Chairman, that no one on Capitol 
Hill that I talked to yesterday — and I talked to many of them — 
knew that the NAACP came out against NAFTA in a considered 
statement in July 1993. That just illustrates another example of 
how broad the NAFTA — anti-NAFTA coalition is, and how the 
White House is trying to narrow it as if it is primarily represented 
by Ross Perot. 

The key point to remember is that, though NAFTA restricts the 
democratic rights of all Americans, it is drawn primarily to serve 
the interests of a narrow special interest group, the owners of large 
corporations. 

As the NAACP noted in its July 14, 1993, resolution opposing 
NAFTA, "NAFTA is not primarily a free trade agreement." That is 
where Members of Congress must focus on. It is much more than 
a free trade agreement. 

And to continue the NAACP, "Rather, it is an investment agree- 
ment designed to protect investments which U.S. companies make 
in Mexico. 

Under a NAFTA regime, those outside this protected class will 
be especially vulnerable to economic loss. As NAACP President, 
Rev. Benjamin Chavis pointed out, 

African American workers could bear the brunt of the downside of the trade 
agreement. The downside is the relocation of American industries to Mexico. African 
American workers are concentrated in urban communities employed by flight-prone 
industries. These industries — textile and apparel factories and auto assembly 
plants — currently have large percentages of African American workers. These indus- 



25 

tries are in communities already suffer high unemployment and are most vulnerable 
to the social upheaval that is brought about by higher unemployment. 

Similar effects can be anticipated by Latinos, Asian Americans, 
and other communities where working people are left with no re- 
course in the face of accelerating corporate flight. 

This month's executive council meeting of the Coalition of Black 
Trade Unionists was reportedly dominated by discussion of 
NAFTA's deleterious effects, ranging from job loss, to hazardous 
waste exposure, to generalized downward pressure on U.S. wages. 

Mr. Clinton calls this the politics of fear. Mr. Clinton is not going 
to lose his job. Members of Congress are not going to lose their iob. 
The heads of the major national newspapers are not going to lose 
their job. The corporate lobbyists are not going to lose their job. 

It is pretty presumptuous for them to look at people who have 
already lost their jobs, who are about to lose their jobs, who are 
trying to make ends meet, and say they are radiating the politics 
of fear. They have a ri^ht to be fearful from the past, the present, 
and future projections if NAFTA is enacted together with revised 
GATT. 

Bill Lucy, the Coalition's president, noted that such NAFTA-gen- 
erated shocks would be especially damaging coming in the current 
economic political context, 

You've got the continued drag on the urban economy resulting from the prior re- 
cession. You've got the Federal Government unable or unwilling to put resources 
into the community, given its budget deficit, and an unwillingness of taxpayers to 
raise taxes to meet the service needs of the community. 

I want to bring to your attention, Mr. Chairman, a survey that 
was printed in the Wall Street Journal about 12 months ago, a 
Roper poll, of chief executives of American manufacturing firms. 
They were asked, among others, two questions. If NAFTA passes, 
if NAFTA passes will you use it as a lever to hold down American 
wages? Twenty-four percent of the executives of these manufactur- 
ing firms said yes or very likely. 

They were also asked, if NAFTA passes, would you relocate some 
of your factories to Mexico? Forty percent answered in the affirma- 
tive. 

Now that is the horse's mouth. That is not Al Gore's euphoric 
projections. That is the horse's mouth, from people who control 
those jobs. The issue in NAFTA is not a question of how the United 
States will fair vis-a-vis Mexico but rather how the working people 
of both countries will be impacted by the dealings of each country's 
corporate power brokers. 

NAFTA exacerbates a vicious cycle of exploitation under which 
Washington further entrenches a repressive Mexican regime, 
which, in turn, holds down local wages through repression, which, 
in turn, lures United States firms to relocate in Mexico, which, in 
turn, leaves United States workers dispossessed and forced to seek 
retraining from Washington for jobs that don't exist. 

How can you have competitive trade that is fair between two 
countries, one which has the right to form labor unions and the 
right to raise wages and, second, Mexico, which represses wages, 
represses pollution control, represses democracy, steals elections, 
prevents independent courts, and makes it impossible for the citi- 
zens of Mexico to make sure that their government upholds the ob- 



26 

ligations under NAFTA which they agreed to under NAFTA in the 
side agreements? 

It is not possible. You can't have an economic union between a 
modest democracy and a repressive dictatorship because the dicta- 
torship will cheat. The dictatorship will say they will enforce the 
minimum laws, and the minimum wage laws, and the child labor 
laws, and the pollution laws, even against the past history of out- 
rageous noneniorcement. 

But they will have a vested interest in cheating, and we can't 
stop the Mexican Government from cheating, nor can the Mexican 
people. 

That is a critical distinction which escapes the generalized char- 
acterization of free trade. The Labor Council for Latin American 
advancement, which represents 1.5 million Hispanic trade union- 
ists, pointed out its recent statement of opposition to NAFTA that 
the cycle strikes with a sharply racially disproportionate impact. 

The Council noted that, 

Minority workers are more likely to be laid off during plant shutdowns and fur- 
loughs, with Labor Department reports indicating that between 1987 and 1991, 49 
percent of Hispanic workers and 12 percent of black workers were more likely than 
whites to be displaced. 

It added, that according to the Labor Department data, it also, 

remains more difficult for minority workers to find new employment. ... Of the 
Latino workers displaced from 1985 to 1989, more than a third were still officially 
unemployed or had dropped out of the labor force as of January, 1990. 

Now who are you going to believe — Al Gore, Bill Clinton, or the 
human rights groups in Mexico, and the political opposition parties 
who have had their election victories stolen from them — that Mex- 
ico cannot uphold the agreements under NAFTA if it is controlled 
by 30 families and a repressive dictatorial regime that has been op- 
erating that way for 64 years and that, by common accounts, stole 
the 1988 election for President Salinas, who is one of the cosigna- 
tories under the pact? Who are you going to believe? 

Who are you going to believe? Bill Clinton and Al Gore and their 
corporate backers? Or are you going to believe studies by Hispanic 
scholars — people like Jorge Castinada, people like Lester Thurow of 
MIT — who told me that NAFTA will increase illegal immigration 
into the United States because cheap American corn will flood the 
market in Mexico, 18 million Mexicans and children rely on corn 
and bean economy. As they are dispossessed they go into the big 
cities, there are no jobs, they head north. 

Lester Thurow is a mild endorser of NAFTA. And so when he 
says it is going to increase illegal immigration, you better take it 
as an admission against interest, as the lawyers say, with en- 
hanced credibility. 

Everything NAFTA touches becomes more autocratic and less 
democratic, more remote from the public's right to know, partici- 
pate, and decide, and more concentrating of power in the hands of 
multinational corporations. 

And this is an important — very important point that should con- 
cern all Americans wherever they come from, the damage to our 
democracy by NAFTA. 

From its morbidly secretive conception by corporate lobbyists and 
their governmental allies to the secretive, exclusive, and essentially 



27 

unreviewable decisions by international tribunals that are wholly 
alien to our country's judicial and administrative law practices, 
NAFTA diminishes U.S. democracy. 

The trade agreement subordinates consumer, environmental, and 
worker health and safety considerations to its commercial dictates, 
largely designed by global corporations. The repeated drum beat in 
the hundreds of pages of NAFTA and GATT revisions is a commer- 
cial trade imperative — read, corporate mercantilism — are what 
noncommercial values, such as health, safety, and conservation 
must bend beneath. 

Already, in recent years under trade agreements such as the 
United States Canadian Trade Agreement and GATT, nations, pro- 
voked by their dominant companies, have been challenging internal 
health, safety, and other domestic standards as keeping out im- 
ports, as nontariff trade barriers. Take some of the examples: Can- 
ada challenged our asbestos phaseout, a killer of over 200,000 
Americans. Why did they challenge it? Because they said it keeps 
out Canadian asbestos from United States markets. 

We took on Canada's control of acid rain, saying their tax incen- 
tives to their fossil fuel companies were unfair competitive advan- 
tages to our fossil fuel companies. 

Canada had to repeal its Compulsory Drug Price Act to conform 
with NAFTA, which has kept drug prices lower in Canada than the 
United States, even though it is the same drug companies selling 
in both countries. 

And so we go. Challenges on raw log exports, tuna-dolphin, milk 
safety, tobacco, recycling, food labeling, auto insurance, are some of 
the recent, pending, or tentative forays pushing existing trade 
agreement envelopes in anticipation of the giant "go" signals for 
such invasions of sovereignty under NAFTA and the GATT revi- 
sions. 

While all trade agreements involve some relinquishment of na- 
tional sovereignty, Mr. Chairman, as with setting tariffs, these new 
world corporate order agreements take away too much democratic 
self-determination and replace it with antidemocratic procedures 
and decisions far beyond the reach of voters, consumers, workers, 
and taxpayers. 

What is really at work in all these proposed agreements is the 
drive by multinational companies to end-run our democracy, to 
break free from the constraints of national sovereignty. 

These multinational companies want global commerce but with- 
out democratic global law to hold them accountable. 

NAFTA can, therefore, be described as a "pull down" trade agree- 
ment, in contrast to the European Economic Community's "pull up" 
conditions placed, for example, upon Spain, Portugal, and Greece 
as conditions for entry, such as they had to be, parliamentary de- 
mocracies, which Mexico is not. They had to have worker safety 
nets, which Mexico does not have. And other rights. 

In contrast, by serving to further entrench the Mexican dictato- 
rial regime and its tight oligarchy of concentrated wealth, NAFTA 
is inimicable to the causes of human rights, political and economic 
democracies, and to the rule of law that millions of Mexicans are 
seeking in order to uplift their miserable conditions. Lester 



28 

Thurow, the MIT economist, said Mexico would not qualify for 
entry into the European Economic Community for these reasons. 

Why does it qualify for entry into the U.S. economic community 
beyond the trade investment already going on and will continue to 
go on with or without NAFTA? 

Americans are not ready to have their hard-fought standards for 
motor vehicle safety, food safety, fuel efficiency, pollution controls, 
recycling, and other conservation measures, to mention a few, mak- 
ing that vulnerable to challenge by foreign countries as nontariff 
trade barriers before secretive unreviewable tribunals that exclude 
all citizens from participation and appeal in any real sense. 

If the citizens of New Hampshire got together, persuaded their 
legislature to establish a safety standard or recycling standard, 
they could be exposed to challenge by a foreign country as keeping 
out imports, hauled before the secretive tribunals. 

The State of New Hampshire could not participate before these 
tribunals. Only the U.S. Government could. And all submissions by 
all parties are secret and the decisions are unreviewable. 

That has got to affect your concern, Congressman. And that is 
exactly what is written in these two volumes, which very, very few 
people have read. And we can give you backup legal analysis for 
all of that. 

It is difficult enough to have to deal with Albany, Sacramento, 
Lansing, Washington, without another layer of autocratic bureauc- 
racy in Mexico City, Geneva, and Rome, making decisions beyond 
the reach of American citizens. 

NAFTA and the GATT revisions would give foreign countries and 
their powerful corporations a field day in dragging down higher 
standards of living, health, and safety in the United States to lower 
country common denominators. That is what harmonization would, 
in effect, mean; and that is why I call it harmonization downward. 

I just spoke with Secretary of Transportation, Federico Pena. I 
asked him whether he knew about a memorandum of understand- 
ing in 1992 under Bush between DOT and the Mexican counter- 
part. He said, what do you mean? I said there was a memorandum 
of understanding about truck driver certification between the two 
countries; and under this bizarre definition of equivalent stand- 
ards, here is what our government now has agreed to with the 
Mexican Government, that the thousands and thousands of Mexi- 
can trucks, who will increase their volume and come into all 48 
States within 3 years if NAFTA is passed, can be driven by Mexi- 
can truck drivers who do not have to know a word of English. That 
is not safe. 

American truck drivers should not be allowed in Mexico without 
knowing some Spanish. These Mexican truck drivers do not have 
to show, "by experience or training," that they know how to drive 
the rig that they are driving, for example, a tank truck, tank truck. 

Ana third, they do not have to demonstrate, by experience or 
training, that they know about their cargo and what to do if their 
cargo shifts, et cetera. 

Now Mexican trucks are inspected at a worse level than ours. 
They are maintained at a less safe level than ours. And when the 
State of California objected to the Department of Transportation 
last year, they said, we can't allow these trucks to come in with 



29 

drivers who don't meet our standards or health tests and for re- 
newability every 4 years. 

The Department of Transportation, unrevoked by Clinton, said, 
California, if you do not agree to this technical amendment, we will 

Eenalize you under the Federal Highway Aid Program. California 
acked down. 

Now, NAFTA is a Mexican truck in our rearview mirror, and 
NAFTA reflects the harmonization downward that is going to affect 
our higher health and safety standards, because NAFTA is a "pull 
down" agreement instead of what it should be, a "pull up" agree- 
ment. 

NAFTA is also something that equates with President Clinton's 
promises to the voters last year. I have had five members of your 
august body, Mr. Chairman, tell me, in the last few days, that they 
never heard of a speech by President Clinton in October 1992, in 
North Carolina, dedicated almost entirely to NAFTA. 

I will submit this for the record. President — candidate Clinton 
said that NAFTA needed to be fixed in 13 ways, such as food safety 
standards, truck standards, democratizing procedures, et cetera, 
worker training, before he would approve it. 

A few weeks ago, President Clinton signed the side agreements 
with Mexico and Canada; 12 out of 13 of these fixes that he prom- 
ised the American people before the election never reached the ne- 
gotiating table. They are not in the side agreements. President 
Clinton did not deliver candidate Clinton's NAFTA. President Clin- 
ton delivered President Bush's NAFTA. 

We will submit the documentation for that in the record. 

[The information follows:] 



30 



Expanding Trade and 
Creating American Jobs 



NAFTA; What's at Stake? 39 



For a high wage country like ours, 
the blessings of more trade can be 
offset at least in part by the loss of 
income and jobs as more and more 
multinational corporations take ad- 
vantage of their ability to move 
money, management, and produc- 
tion away from a high wage country 
to a low wage country. 



by Bill Clinton 



Ladies and gentlemen, I came here to 
North Carolina today to talk about a 
difficult and important issue for our 
country. When I announced my candi- 
dacy for President a year and a day 
ago, I did it not just to challenge Mr. 
Bush, but to challenge the American 
people, and here I come today to talk 
about one of our greatest challenges — 
how we can compete and win in the 
global economy. 

The whole purpose of what one 
person once called the dismal science 
of economics, is to enable us to make 
good decisions that will reward people 
who work hard and develop their God- 
given capacities. 

I came here today to tell you why I 
support the North American Free 
Trade Agreement. 

If it is done right, it will create jobs 
in the United States and in Mexico, 
and if it is done right and it is part of a 
larger economic strategy, we can raise 
our incomes and reverse the awful 
trend of now more than a decade in 

Adapted from "Expanding Trade 
and Creating American Jobs," a 
speech given by then-Governor Bill 
Clinton at North Carolina State 
University in Raleigh, North Caro- 
lina on October 4, 1992. 



which most Americans are working 
harder for less money. 

If it is not done right, however, the 
blessings of the agreementare far less 
clear, and the burdens can be signifi- 
cant. I'm convinced that I will do it 
right 

We live in a world that has been 
revolutionizedalmostbeyondcompre- 
hension. We have seen in the last few 
years the Soviet Union disintegrate, 
the Berlin Wall, freedom fighters re- 
leased from their prisons in Eastern 
Europe and South Africa, the Cold 
War end. Less obviously but no less 
dramatically, we have seen unbeliev- 
able changes transforming the global 
economy, which have had their im- 
pact here at home. 

A little more than a generation ago, 
international trade and investment 
were a seemingly insignificant por- 
tion of our nation's income, but today 
our exports and imports of good and 
services amount to about a quarter of 
our entire economy. 

A little more than a generation ago, 
American workers, consumers, and 
companies lived almost entirely within 
the American economy. Today, we 
live within the world economy, and 
foreign trade accounts for almost as 
high a proportion of our economic 
activity as it does in Japan and West- 
ern Europe. 



A little more than a generation ago, 
we were virtually unchallenged in the 
world marketplace, but today we are 
challenged as never before not only by 
Japan and Western Europe, but by 
other countries as welL 

A little more than a generation ago, 
the world was a far simpler place. We 
could support free trade and open 
markets and still maintain a high wage 
economy because we were the only 
economic superpower, and our ca- 
pacity to control our destiny was 
largely totally within our own hands. 

Now, because money, management, 
and production are mobile and can 
cross national borders quickly, we face 
unprecedented competition from de- 
veloping countries, as well as 
wealthy ones. 

You know that in North Carolina 
and so do I. A textile worker in Caro- 
lina has to compete against a textile 
worker in Singapore perhaps to sell 
sweaters in Germany. 

It's also hard to tell who the players 
are. An American car may have more 
foreign parts in it than a foreign car 
that happens to be made in an Ameri- 
can assembly plant. 

This, in other words, is not a simple 
debate. The world is changing in com- 
plex ways. The choices before us are 
difficult, and it is imperative that at 
least we understand what is going on, 



31 



40 NAFTA: What's at Stake? 



and that we have an honest and forth- 
right discussion of all the forces at 
play. 

For a high wage country like ours, 
the blessings of more trade can be 
offset at least in part by the loss of 
income and jobs as more and more 
multinational corporations take ad- 
vantage of their ability to move money, 
management, and production away 
from a high wage country to a low 
wage country. 

We can also lose incomes because 
those companies who stay at home 
can use the threat of moving to de- 
press wages, as many do today. Other 
countries like Germany and Japan 
have, quite frankly, managed this prob- 
lem much better than we have. How 
have they done it? 

First of all, by maintaining a more 
highly-skilled work force not just 
among their university graduates, but 
up and down the line among all their 
workers. 

Secondly, by investing more in 
modem plant and equipment, and in 
research and development, and devel- 
oping better systems of moving ideas 
from the laboratory to the market 
place, so that if they lose one kind of 
manufacturer job, there are always 
other kinds opening up. In contrast to 
what you often have here, where when 
people lose their manufacturing job, 
they look around until their unem- 
ployment runs out, and then eventu- 
ally take a job making half what they 
used to make. 

Thirdly, these countries do a better 
job of controlling their external costs 
like health care and energy. The aver- 
age German factory produces the same 
amount of output as the average Ameri- 
can one for one-half the energy input, 
and our country spends 30 percent 
more of our income on health care 
than any other nation with which we 
compete. 

Next, other countries do a better 
job of exporting more and of continu- 
ously increasing productivity by work- 
ing together more closely, business 



The issue here is not whether we 
should support free trade or open 
markets. Of course, we should. The 
real issue is whether or not we will 
have a national economic strategy to 
make sure we reap the benefits, and 
the answer today, is, we don't 

and labor, government and education. 
But also let's be frank — Germany and 
Japan have policies that are tougher 
in keeping high wage jobs at home, at 
least for the home market. The Euro- 
peans have an absolute ban on foreign 
car sales that exceed 16 percent of the 
market now in Western Europe. The 
Japanese distribution system means 
that only 3 per cent of the cars sold in 
Japan are not Japanese. We have an 
auto parts export surplus of $4 billion 
with every country in the world, but 
when you add Japan in, we have a $9 
billion deficit. 

For some time now — as you see, 
this is a very complicated thing, and 
for some time I have felt that one of 
the most diffi cult problems in modern 
politics and in, therefore, in this presi- 
dential election, is the simplistic and 
superficial labeling of complex issues. 

As network news sound bites have 
shrunk by one study — they're down 
to less than 9 seconds now — public 
discussions of important issues have 
gotten the short shrift. On, perhaps, 
no other issue has the decline of dis- 
course been more pronounced than 
on the issue of trade. 

Too much is at stake here to avoid 
the real issues, and, yet, time and 
again, that is what we do. 

The issue here is not whether we 
should support free trade or open 
markets. Of course, we should. The 
real issue is whether or not we will 
have a national economic strategy to 
make sure we reap the benefits, and 
the answer today, is, we don't. 

Too many Republicans would say 
that it's a simple issue — free trade 
always equals economic growth . Well, 
it can, but only if we have a compre- 
hensive national strategy to promote 



that kind of growth. 

Some Democrats would say that 
free trade today always equals export- 
ing jobs and lowering wages. Well, it 
sure can if you don't have a compre- 
hensive economic strategy to main- 
tain a high wage, high growth 
economy. 

It is in that context that we have to 
look at this North American Free Trade 
Agreement. Is it good for Americans? 
Will it help us to develop a high wage, 
high growth economy here at home? 
Or, by opening Mexico to more U.S. 
and foreign investment, will it simply 
encourage more United States com- 
panies to abandon their workers and 
communities here and move to 
Mexico? Will it depress wages of those 
who are left here, and will they even 
have ironically less money to buy the 
products that Mexico will send back 
to this country? 

Well, if you look at the experience 
of the maquiladora plants, those who 
have moved to Mexico right across the 
border, there is certainly cause for 
concern. We can see clearly there that 
labor standards have been regularly 
violated; that environmental standards 
are often ignored, and that many 
people who have those jobs live in 
conditions which are still pretty dis- 
mal not just by our standards, but 
theirs. 

So there is some reason to fear that 
there are people in this world and in 
our country who would take advan- 
tage of any provisions insuring more 
investment opportunities simply to 
look for lower wages without regard 
to the human impact of their deci- 
sions. 

Still, you must look at the other side 
of the coin. Changes in Mexico under 
President Salinas have ballooned our 
two-way trade with them and have 
eliminated the trade deficit we once 
had with Mexico. Thus, creating jobs 
here in America even as our invest- 
ment policies have cost them. 

I can also say based on my own 
experience, that a good economic 



32 



policy can grow manufacturing jobs 
even in tough global competition. 

In our state, thanks to highly pro- 
ductive workers and creative busi- 
ness leaders, good cooperation be- 
tween the government and the pri- 
vate sector, good incentives and ag- 
gressive support for educating work- 
ers, promoting quality management 
and marketing more products, we have 
grown manufacturing jobs at 10 times 
the national average for several years 
now. There are many and complex 
reasons for this, but we did have a 
definite strategy that involved part- 
nerships with a deliberate decision 
not to give up our manufacturing base. 
That is very important 

In the United States of America 
today, only about 16.5 per cent of the 
work force is in manufacturing. In my 
state, it's 22 percent. 

I want to make it very clear — I am 
committed to maintaining a strong 
manufacturing base in this country. 

The great economic power in this 
world are the people who make things. 
We have 16.5 per cent of our work 
force in manufacturing, Japan has 28 
per cent, Germany has 32 per cent. 
We must do better and we can. 

I believe NAFTA con contribute to 
this effort, not undermine it, as long as 
we move aggressively to address the 
serious omissions from the agreement. 

I believe we have to do more for our 
own workers, to protect the environ- 
ment on both sides of the border, both 
because it's good for the environment 
and because if they don't do it, it will 
further lower their cost of production, 
to promote prosperity on both sides of 
the border. 

If we do these things and, again, if 
we develop a serious economic policy 
at home, than NAFTA can be a very 
good thing for the United States. 

We simply cannot go backwards 
when the rest of the world is going 
forward into a more integrated 
economy. We cannot go inward when 
our opportunities are so often out- 
ward. For all our history, America has 



I am committed to maintaining a 
strong manufacturing base in this 
country. I believe NAFTA can con- 
tribute to this effort, not undermine 
it, as long as we move aggressively 
to address the serious omissions 
from the agreement. 



moved ahead and reached out, colo- 
nizing a wilderness, exploring a conti- 
nent, always seeking what President 
Kennedy called the New Frontier. 

And today we must forge ahead 
again. As president, I will seek to 
address the deficiencies of the North 
American Free Trade Agreement 
through supplemental agreements 
with the Canadians and the Mexican 
government and by taking several key 
steps here at home. I will not sign 
legislation implementing the North 
American Free Trade Agreement un- 
til we have reached additional agree- 
ments to protect America's vital inter- 
ests. But I believe we can address 
these issues without renegotiating the 
basic agreement. 

This agreement, however, is only 
one piece of a larger puzzle. Even the 
present negotiations recognize that, 
as there are other issues being dis- 
cussed all along. We need not only to 
reduce trade barriers, but to prepare 
our entire work force not only to com- 
pete in the global economy, but to live 
with the changes in it and to make 
sure nobody gets left behind. 

I remain convinced that the North 
American Free Trade Agreement will 
generate jobs and growth on both 
sides of the border if and only if it's 
part of a broad-based strategy, and if 
and only if we address the issues still 
to be addressed. 

If we don't do those things, we can 
kill NAFTA, but we'll still lose jobs. 
And that's the important point I want 
to make. I have been governor of a 
state that has seen jobs go on a fast 
track to Mexico and to other coun- 
tries. If we do nothing on this agree- 
ment and we don't address the seri- 
ous worker retraining and economic 



NAFTA What's at Stake? 41 



investment issues in this country and 
we don't change our economic policy, 
we will still lose jobs because money, 
production, management are mobile, 
and there are people, unfortunately, 
in this world who would rather move 
for cheap wages than stay and work 
for productivity. 

We have got to face the bigger 
issue. We cannot overload NAFTA 
and make it the symbol of either all 
our hopes, as Mr. Bush has done, or all 
our fears, as some of the opponents 
have done. We have got to see this as 
a part of a real big effort to rebuild the 
American economy from the ground 
up. 

This is not an abstract question. It 
has real consequences for real people. 

For more than a decade, our coun- 
try has been led by yesterday's men, 
who were out of touch, out of ideas 
and out of step with the developments 
in the global economy, who refused to 
recognize not only new opportunities, 
but new challenges and new responsi- 
bilities. 

Americans have paid a terrible price 
for their policies. Trickle-down eco- 
nomics have given us a weakened 
economy, declining wages for more 
than two-thirds of our workers, longer 
workweeks, lost jobs, greater inequal- 
ity, greater poverty, one in 10 Ameri- 
cans on food stamps today, a hundred 
thousand Americans a month losing 
their health insurance, and the real 
sense that we may be raising the first 
generation of Americans to do worse 
than their parents. 

Without a national economic strat- 
egy, this country has been allowed to 
drift Meanwhile, our competitors have 
organized themselves around clear 
national goals to save, promote and 
enhance high wage, high growth jobs. 

In a Clinton administration, we will 
approach trade and every other issue 
withasingle-mindedfocus, to do what 
is best for ordinary Americans who 
are willing to work hard to get ahead. 

But that focus must also recognize 
the new rules of the global economy. 



33 



42 NAFTA: What's at Stake? 



When Japan discovers a way just to 
make cars a little better, or when our 
president refuses to issue export cred- 
its and European farmers take away a 
Russian market that was meant to be 
for us, or when a country in South Asia 
or South America violates copyright 
standards for software, the impact is 
felt in factories and farms an d families 
all across America. 

But when people line up in Paris to 
watch an American movie, when fami- 
lies around the world eat American 
food, when a jet made in Seattle lands 
or takes off from an airport in Seoul, 
American jobs and paychecks are more 
secure. 

Our prospects and our prosperity 
depend upon our ability to win in this 
kind of environment, an environment 
in which what we earn depends on 
what we can learn, in which Ameri- 
cans who only finish high school and 
have no further education and train- 
ing face far grimmer futures than their 
parents, an America in which if we do 
not equal our competitors in research 
and development an d our skill in bring- 
ing ideas into manufacturingjobs here 
at home, unless we have a conversion 
plan to take all the money by which we 
reduce defense and invest it in an 
American economy for the 21st cen- 
tury — in transportation, communica- 
tion and environmental cleanup tech- 
nologies, in biotechnology, in the new 
frontiers that will provide tens of thou- 
sands, indeed, hundreds of thousands 
of high wage jobs if we seize the op- 
portunities, unless we do that, what- 
ever we do on this trade agreement 
will not guarantee or undermine the 
future we are otherwise going to have. 

We've got to understand what the 
big rules are and start following them. 
Our competitors know it. The Ger- 
mans and the Japanese do more with 
education, from public school to ap- 
prenticeships to training in the work 
force, than we do. The average Ger- 
man factory spen ds five times as much 
money retraining its workers as the 
average American employer on an 



While we don't know what will hap- 
pen with other regionaltrading blocs, 
we know that we need stronger ties 
to our neighbors both for positive 
opportunities and to protect us in 
the event that other countries be- 
come more protectionist. We can 
only do that with Canada and with 
Mexico. 

annual basis. 

They do more on research and de- 
velopment than we do. They spend a 
higher percentage of their income. 

But when our companies do have 
well-training workers and competi- 
tive products and services and high 
levels of cooperation and productiv- 
ity, they do very well indeed. We still 
have some of the finest companies in 
the world, that dominate their mar- 
ketplaces in spite of the fact that they 
live in a country which -doesn't en- 
courage investmen t in new plants over 
investment in new Maseratis or third 
or fourth homes. They do well in spite 
of the fact that they live in a country 
which won't control health care costs 
and in spite of the fact that they live in 
a country which doesn't guarantee 
that workers will always have the op- 
portunity to have high, high, high lev- 
els of education and training. 

But no matter what we do in pre- 
paring our workers and investment 
money, we've still got to have markets 
for our products. As much as we ex- 
port, the Germans export a far higher 
percentage per capita than we do. We 
need more markets. And today, re- 
gional economic blocs are emerging, 
very formally in Western Europe and 
less formally, but still surely in Asia, 
organized by Japan and Japanese in- 
vestment. 

It is too early to say whether the 
integration of Western Europe will be 
a plus or a minus for America. If they 
keep opening trade, well, that's good. 

We now have a $17 billion surplus 
with Europe. But they also limit car 
imports to 16 per cent, and they re- 
cently restricted imports of American 



agricultural products on the flimsiest 
of excuses. 

So while we don't know what will 
happen with these other regional trad- 
ing blocs, we know enough to know 
that we need stronger ties to our neigh- 
bors both for positive opportunities 
and to protect us in the event that 
other countries become more protec- 
tionist. 

We can only do that with Canada, 
which is already at roughly our stan- 
dard of living, and with Mexico, which 
is way below our standard of living, if 
we find a way to grow our economies 
together in ways that are good for 
both of us. 

So I advocate this treaty as a begin- 
ning of that process. I hope that one 
day we'll have a global agreement for 
the General Agreement on Tariffs and 
Trade which will be fairer to our coun- 
try and which will open markets 
around the world. But in the mean- 
time, we need to do more in our own 
region. 

If we can make this agreement work 
with Canada and Mexico, then we can 
reach down into the other market- 
oriented economies of Central and 
South America to expand even fur- 
ther. But these three economies to- 
gether will give us, in terms of popula- 
tion, the largest trading market in the 
world today. 

It will provide more jobs through 
exports. It will challenge us to be- 
come more competitive. It will cer- 
tainly help Mexico to develop, but 
still, that is also in our interest: A 
wealthier Mexico will buy more Ameri- 
can products; as incomes rise there, 
that will reduce pressure for immigra- 
tion across the border into the United 
States, which depresses wages here. 

President Salinas has taken some 
important steps. He's privatized cor- 
porations, he's reduced his debt, he's 
tamed inflation and he's brought down 
trade barriers. As I said, the unilateral 
initiative of the Mexicans has led to a 
huge increase in the products we sell 
there and the evaporation of the trade 



34 



deficit. They also encouraged us to 
enter these negotiations. 

Now, what we have to do. I will say 
again, is to have a new kind of leader- 
ship to make this work. We have to 
have an overall trade policy that says 
to our trading partners, particularly 
our wealthy ones, if you want access 
to our market, you've got to give us 
access to yours. 

When the president went to Japan, 
it was sort of sad. He took the auto 
company executives and pleaded with 
the Japanese to buy cars. But his 
U ruted States trade representative had 
given him a report that said that if 
Japanese markets were as open as 
American markets, they would buy 
$10 billion more products from us 
every year, everything from agricul- 
ture to auto parts to electronics, in 
ways that would create 300,000 high- 
wage jobs in America. 

So we had to say trading blocs are 
not enough. We need fair treatment in 
other countries if we are giving them 
fair treatment in ours. 

But let me get back to this agree- 
ment Although it is unpopular with 
some people and organizations I ad- 
mire and who represent the very 
Americans I am fighting so hard for in 
this election, I think we should go 
forward with it because it advances 
our interests, the interests of ordinary 
Americans, more than it undermines 
them if we also do the other things 
needed to deal with the deficiencies 
in this agreement and if we have a 
good new economic policy. 

The agreement reduces and even- 
tually eliminates trade barriers in 
place, especially in Mexico, against a 
number of major American exports. It 
opens up larger markets for our goods 
and services. Itwill phase out virtually 
all tariffs between the U.S. and Mexico 
over the next 15 years, with some of 
the most sensitive products being 
given the longest transitions. 

Yet, as I said, there are critical is- 
sues which remain unaddressed, from 
worker' rights to farmers' needs to 



The most glaring omission in Bush's 
package is its lack of meaningful 
assistance to vulnerable workers and 
communities. We must offer real 
training programs to deal with the 
real problems. Trade adjustment as- 
sistance that includes training, health 
care benefits and income supports, 
and assistance to communities to 
create jobs. 

environmental protection. Despite the 
promises he made to really address 
these in a forthright way, Mr. Bush has 
failed, most important, to provide ad- 
equate assistance to our workers, 
those most likely to be hurt by eco- 
nomic integration with Mexico. 

American farmers could also suffer 
without stronger safeguards for their 
interests. And the environmental pro- 
visions are still too weak. This agree- 
ment does nothing to reaffirm our 
right to insist that the Mexicans follow 
their own labor standards, now fre- 
quently violated — this is a a very im- 
portant issue — and not aggravating 
the wage differentials which already 
exist 

As we move toward free trade, we 
must always remember why we're 
doing it — to help the working men 
and women of America. We should 
not do things that are not in the inter- 
est of our people over the long run. 

There are apparel workers, fruit 
and vegetable farmers, electronic 
workers, auto workers who are at risk 
not only of short-term dislocation, but 
of permanent damage if this agree- 
ment is not strengthened and im- 
proved Industries that have already 
been hard hit by the flow of jobs to 
Mexico will continue to be hurt unless 
we negotiate tougher measures to 
protect them and to make ourselves 
more competitive. 

This agreement underscores the 
core of the differences between me 
and Mr. Bush. From the national eco- 
nomic recession to the dislocations 
caused by defense cutbacks, his atti- 
tude has been that we should have 



NAFTA: What's at Stake? 43 



trickle-down economics and let the 
market have its way, keep taxes low- 
est on the wealthiest Americans, then 
get out of the way. He seems to be 
saying, so what if some workers get 
hurt or some farmers get hurt or some 
environmental damage is done? So 
what? Sooner or later, it'll all come out 
in the wash. Well, a lot of Americans 
are being washed away by that eco- 
nomic philosophy. 

I want America to go forward with 
expanded trade with our neighbors. I 
also want an America that has a na- 
tional economic strategy that makes 
sense. 

And I believe there are some things 
we need to do to make this agreement 
stronger, but I think they can be ad- 
dressed without renegotiating the 
basic free trade agreement. 

As president, I will ensure adequate 
measures are taken before Congress 
acts to implement the free trade agree- 
ment. I don't want to give up all our 
leverage to help our workers and to 
make sure our environment is pro- 
tected by basically ratifying the agree- 
ment through legislation. I think that 
we don't have to reopen the agree- 
ment, but we do have to insist that 
protection for our workers and for the 
environment proceed on parallel 
tracks. We should do it all at once. 

I think there are five unilateral steps 
we should take, and there are three 
supplemental agreements we should 
negotiate with Canada and Mexico to 
achieve an acceptable package. Here 
they are: First, what we have to do: 
we've got to address the long-ne- 
glected needs of our working people, 
both skilled and unskilled who are on 
the front lines of new economic condi- 
tions and who may be displaced The 
most glaring omission in Mr. Bush's 
package is its lack of meaningful assis- 
tance to vulnerable workers and com- 
munities. 

For those who need training, we 
must provide it. We will give you real 
programs to deal with the real prob- 
lems. Trade adjustment assistance that 



35 



44 NAFTA: What's at Stake? 



includes training, health care benefits 
and income supports, and assistance 
to communities to create jobs. You 
can train people all you want, but if 
they don't have anything to do, it will 
be like being all dressed up with no 
place to go. 

The second thing we have to do is 
move to protect our environment 
Before we implement this, we have to 
be sure first, that there will be envi- 
ronmental clean up and infrastruc- 
ture investments in our country suffi- 
cient to do what we have to do. 

The third thing we have to do is to 
make sure we do something for the 
farmers who are at risk here. I am 
convinced having read this agreement 
with some care that some of the farm- 
ers will do better under it than they 
fear that they will and that the losses 
in some sectors have been somewhat 
exaggerated. However, there will cer- 
tainly be some dislocation. 

Assistance should be provided to 
farmers who are threatened. We can 
assist them first by strict application 
of American pesticide requirements 
to imported food. 

We should help some growers ship 
to alternative crops, and those who 
may lose out to competition should be 
just as eligible for transition assis- 
tance as workers in businesses and 
communities are. 

Fourth, we ought to make sure that 
NAFTA, the trade agreement, doesn't 
override the democratic process. 

For example, in the provisions on 
the environment, the current agree- 
ment contains no mechanism for pub- 
lic participation in defending chal- 
lenges to American laws if we apply 
our environmental laws against Mexi- 
can products, or in bringing challenges 
to the practices of other parties. 

I think the new Congress should 
pass legislation to provide for public 
participation in crafting our position 
and ongoing disputes, and to give citi- 
zens the right to challenge objection- 
able environmental practices by the 
Mexicans or the Canadians. 



We ought to make sure that NAFTA 
doesn't override the democratic pro- 
cess. For example, in the provisions 
on the environment, the current 
agreement contains no mechanism 
for public participation in defending 
challenges to American laws if we 
apply our en viron mental laws against 
Mexican products. 

Fifth, I think we have to make sure 
this agreement's provisions allowing 
foreign workers to cross our borders 
are properly implemented. We have 
to assure that certain professional 
workers aren't brought in here as strike 
breakers. The recent experience 
where Canadian workers were brought 
into the country to break our nurses' 
strike by American nurses is an ex- 
ample of this. That should never be 
repeated. 

As president, I have said repeatedly 
I would support a law to outlaw the 
use of permanent replacement work- 
ers, and I certainly will negotiate to 
stop the use of replacement workers 
from Canada and Mexico. 

I also think — I want to note that 
this agreement allows Mexican truck- 
ers to drive in the United States with- 
out having to satisfy all the U.S. safety 
and training standards. That troubles 
me, and I think that you have to say 
that we must do everything we can 
under the agreement, and there are 
some things we can do, to assure 
there is adherence to U.S. standards 
through tough inspections. 

There are several areas now that 
we have to negotiate supplemental 
agreements which I would want to 
present together with the agreement 
that's already been negotiated. Be- 
fore implementing the agreement, we 
must establish an environmental pro- 
tection commission with substantial 
powers and resources to prevent and 
clean up water pollution. The com- 
mission should also encourage the 
enforcement of the country's own 
environmental laws through educa- 
tion, training and commitment of re- 



sources, and provide a forum to hear 
complaints. 

Such a commission would have the 
power to provide remedies, including 
money damages and the legal power 
to stop pollution. As a last resort, a 
country could even be allowed to with- 
draw. 

If we don't have the power to en- 
force the laws that are on the books, 
what good is the agreement? 

We must have some assurances on 
this. This is a major economic as well 
as an environmental issue. 

Best of all, I'm going to ask Senator 
Gore to take charge of ensuring that 
an effective commission is established 
and that it does work to protect the 
environment. Al Gore and I will en- 
sure that the environmental protec- 
tion commission is up and running 
when the free trade agreement is up 
and running. 

A second commission with similar 
powers should be established for 
worker standards and safety. It too 
should have extensive powers to edu- 
cate, train, develop minimum stan- 
dards and have similar dispute resolu- 
tion powers and remedies. We have 
got to do this. This is a big deaL 

Perhaps the toughest issue of all is 
how to obtain better enforcement of 
laws already on the books in the envi- 
ronment and worker standards. It's 
interesting that the agreement nego- 
tiated by the Bush team goes a long 
way to do this in protecting intellec- 
tual property rights and the right to 
invest in Mexico, but is silent with 
respect to labor laws and the environ- 
ment 

I want to remedy that I'm inter- 
ested in the impact of this agreement 
on the rest of the people, not just 
those investing in Mexico, but the rest 
of the people in this country and the 
rest of the people in their country. 

So we need a supplemental agree- 
ment which would require each coun- 
try to enforce its own environmental 
and worker standards. Each agree- 
ment should contain a wide variety of 



36 



procedural safeguards and remedies 
that we take for granted here in our 
country, such as easy access to the 
courts, public hearings, the right to 
present evidence, streamlined proce- 
dures and effective remedies. I will 
negotiate an agreement among the 
three parties that permits citizens of 
each country to bring suit in their own 
courts when they believe their domes- 
tic environmental protections and 
worker standards aren't being en- 
forced. 

Finally, I want to ask Congress to 
grant the authority to the president to 
continue negotiations on the impact 
of this treaty. What if we have a global 
agreement? How will that impact this? 
And most important, what happens if 
there is an unexpected surge in im- 
ports in one sector or another that 
displaces huge numbers of people in 
this economy? 

We have in our present trade law, 
believe it or not — a lot of people don't 
know this — we have in our present 
trade law the capacity to protect our 
own workers if there is an unexpected 
surge in exports — or imports — into 
our country in some sectors of the 
economy, where the displacement is 
too great for us to manage, too great 
for us to retrain, too great for us to put 
people to work in other sectors. 

That provision is contained for au- 
tomobiles only in the North American 
Free Trade Agreement, and the rem- 
edy is weakened substantially. 

I believe we should negotiate a par- 
allel agreement that deals with the 
fact that neither the Mexicans nor the 
Americans know what the full conse- 
quences of this agreement are going 
to be. You can't get anybody to agree 
on how many jobs we're going to lose 
or how many jobs we're going to gain 
out of this. And I think it's fair to say 
that we don't want to do anything 
that's unnecessarily crippling to them, 
and they shouldn't want to do any- 
thing that's unnecessarily crippling to 
us. 

So I will ask the Congress to give me 



We've got to stop using our own 
taxpayers' money to export their own 
jobs. It's unbelievable that we actu- 
ally spent more money under the 
Bush administration last yearto train 
workers in Central America than we 
spent to train people in middle 
America who had lost their jobs be- 
cause of foreign competition. 



extended authority to negotiate an- 
other agreement to deal with the abil- 
ity of both countries to move in the 
event there is an unexpected and over- 
whelming surge in imports into either 
country which would dislocate a whole 
sector of the economy so quickly that 
there's nothing we could do about it to 
overcome the economic impact. 

Now, I want to say one more time, 
none of this will make a difference 
unless we have a new economic policy. 
The Bush administration has no strat- 
egy to create and preserve jobs in 
middle America, but they offer job 
training, low cost loans and technical 
assistance to companies that'll move 
to Central America. I know that most 
of you saw or now have heard the 
television show which documented 
the fact that the United States Agency 
for International Development has 
spent at least $289 million for pro- 
grams to encourage American busi- 
nesses to shut down here and move to 
Central America and the Caribbean. 
In fact, your tax dollars paid for this 
advertisement. And I quote — you paid 
for this: Rosa Martinez produces ap- 
parel for the U.S. markets on her sew- 
ing machine in El Salvador. You can 
hire her for 57 cents an hour. 

How do you feel about paying for 
that? You paid for low-interest loans 
to a plant in Tennessee to shut down 
in Tennessee, put 304 people on the 
street, and move to Central America. 
But that fellow running that plant 
couldn't get the same low-interest loan 
to modernize plant and equipment in 
Tennessee to keep those people work- 
ing. 



NAFTA What's at Stake? 45 



You paid for an employee of the 
United States government who was 
photographed in an interview saying 
that the workers in the country he was 
working in were more reliable than 
the workers in Miami, Florida. You 
paid for that. 

It is no wonder that the American 
working people are so frightened of 
having this administration implement 
this trade agreement 

We've got to stop using our own 
taxpayers' money to export their own 
jobs. And it's unbelievable to me that 
we have actually spent more money 
under the Bush administration last 
year to train workers in Central 
America than we spent to train people 
in middle America who had lost their 
jobs because of foreign competition. 

Now, that is their priorities. But let 
me say again, it's not enough just to 
stop what they are doing wrong. We 
have to do some new things right. And 
let me reel them off quickly: 

We've got to change the tax system 
in this country. We shouldgive people 
more incentives if they invest in new 
plants, new equipment, new small 
businesses, research and develop- 
ment, housing, the kinds of things 
that put the American people to work, 
and we should remove from the tax 
code the incentives to shut plants 
down here and move them overseas. 
That's what we should do. 

This is entirely consistent, with what 
the other wealthy countries do. This is 
the only country — you look at Ger- 
many and Japan, look at their tax 
code — that would say we're not going 
to give you an investment tax credit to 
modernize your equipment and your 
plant; but shutyour plant down, move 
it overseas, we'll give you a tax deduc- 
tion for shutting the plant down, we'll 
give you loss carried forward for the 
losses in the earlier years, keep your 
money down there and you'll never 
have to pay income tax on it in America. 

It's all backward. We need a tax 
system that's an investment job-ori- 
ented tax system that says, we want 



46 NAFTA: What's at Stake? 



37 



people to make money in America, 
but we want them to make it the old 
fashioned way — make millionaires by 
putting other Americans to work. 
That's very, very important. 

I mentioned this once before and 
you clapped so 1 know you got it, but 
we've got to have a conversion strat- 
egy to do something with the defense 
money. The defense budget is going 
to be cut no matter who wins this 
election. 

But look what has happened. What 
has happened under the present ad- 
ministration is all that money is going 
to the S&L bailout and the higher 
health care costs. I want to put it into 
jobs for Americans. It's important. 

We've got to have — we have got to 
finally join the other advanced nations 
and have a national system to bring 
health costs in line with inflation and 
provide basic health care to all Ameri- 



cans; one that preserves the strengths 
of our system, but deals with the prob- 
lems. 

We've got to bring energy usage 
into competitive lines with more effi- 
ciency and alternative uses of energy, 
more use of cheap American natural 
gas, renewable energy sources, and 
efficiency. 

If we could be as efficient in every 
factory and office building as our for- 
eign competitors, it would free up 
billions of dollars to reinvest in this 
economy. If we could bring health 
care cost in line with inflation, it would 
save the average American family 
$1, 200 ayear and hundreds of billions 
of dollars for this economy, which 
could be reinvested for new jobs by 
the end of this decade. 

In the end, whether the North 
American Free Trade Agreement is a 
good thing for America, Is not a ques- 



tion of foreign policy. It is a question of 
domestic policy. 

If we are not strong at home, we will 
inevitably be weaker abroad. We have 
to build a new economy in which 
incomes and employment are rising 
and companies are growing; a society 
in which opportunity is expanding 
and hope comes alive again. 

And so I say to you, my fellow Ameri- 
cans, we have to have the courage to 
change, and a part of that change 
should involve a closer relationship 
with Mexico now under better leader- 
ship than ever in my lifetime. If we 
have the determination to reject failed 
policies and the old labels of the past, 
if we have the vision to see and work 
toward a better tomorrow, then we 
need not fear the future. If we seize 
this day and shape this change, we 
can make our great country what it 
was meant to be. ■ 



38 



NAFTA 

Supplemental Scorecard 



By Clinton's Own Standard, Side Pacts 
Announced 8/13/93 Do Not Measure Up 

It's the Same Bad Bush NAFTA 



What Clinton Said Must Be Fixed 
in a 10/92 NAFTA Policy Statement 



■Fixed' 



Included in 
Negotiation 
Bui... ' 



Never Even 
Reached the 
Negotiating 
Table 



Shield domestic environmental and 
consumer laws from challenges 






« 


Safeguard U.S. manufacturing jobs and 
wage levels 






X 


Guarantee the safety of imported foods 






X 


Secure border environmental dean up, 
infrastructure build up 




X 

A border infrastructure bank is creeled which would 
lend money lor water and sewage treatment 
projects. The U.S. must pay $225 miion. This 
money b not provided in NAFTA the side 
agreements or tie iwpfcwi fcg legislation. Also not 
provided is the other $13 bHon to $30 bilion 
estinaled to pay lor NAFTA over 5 years. 
Admrcstrabon sources daim rhe bank could 
generate $6 btton in loans. Cleanup of tone cries is 
not included. Siena Club estimates a rnrwnum of 
$21 Hon is necessary just for the environment 


X 


Establish worker adjustment assistance 
& retracing for those injured by NAFTA 




X 

The Admnstrason hnaly put out a $90 m*orv18 
mot* plan that would only cover 25,000 workers. 
This plan is less tian even tie ongral Bush plan. 




Assure NAFTA is good for 
American famiy farmers 






X 


Ensure highway safety (h face of 
harmonization proposals) 






X 


Create new $ for worker retraining, 
environmental cleanup, border 
infrastructure 






X 


Provide ■democratic accourtabWy' 
h NAFTA 






X 



39 



What Clinton Said Must B« Faed 
NAFTA in a 10V92 Policy Statement 



"Fixed' 



Indudadin 

11 ■ nnJi' 
N690D 

But_ 



Never Even 

Reached the 



Table 



Open NAFTA to 'citizen partjapatai' 



No changes to 
open NAFTA 
Commission 
studtes are or*/ 
avaiabte to the 
pubfci2/3of 
me counties 
agree. 
Commi ssi ons' 

SO-Caled DUDfc 

=r. s-:". haaak 
have no real 

nfe 



Enforcement of environmental and 
labor standards in North America. 
(Formation of trinational commissions 
on environment and labor) 



♦ The A On ai bUAu i admte co n iT fesiun sare 
not legaly connected to NAFTA other 
courtries could qui the side agreements and 
sal get NAFTA benefts. 

♦ Corrmsswis mam rotes are merely 
cooperation, study of condttons. 

♦ Only non-enforcement of exstno tews s 
reviewable. Any environmental or labor 
depute caused by NAFTA's terms- such as 
chalenges of tews as Begai earners- cannot 
be addressed m the coinit ai on s . 

• The review process is unwortabte, wiJi 
numerous, complicated steps. Envtonmental 

: = " i £ i'r -' :i ; n: :;■;; - 

1,100 days to complete reviews. 

♦ A 2/3 vote by NAFTA courtries is necessary 
to even nttate a review (unite NAFTA's 
commercial depute rutes which alow any one 

party to ittatel 

• No on-ste inve s tiga ti on or subpoena power 

* Spedc companes causing poiubon in 
viuUiii of tews cannot be targeted. 

* Government to government fines (lie sc- 
caled teeth) have a maximum of only $20 

Faiue to pay the fines could resut in trade 
sarsfeis far Mexico onty. Unless the 
Canadan provinces «9p>ove the side deals. 



Key 



The issues feted in this table were detaied by President Cfnton in rite CXsoter 4, 1992 NAFTA tarpaignpofcy statement Cfntonsaid 
these "fixes' would be necessary for the NAFTA signed by President Bush, to be a good deal for most Americans. The CSnion 
Adrrtntetration, however, has faied to achieve twse "ixes" in the supptemertal negotiations, to faa the vast fisprty of t^^ 
never even made it onto the negotiating table. The Cteens Trade Campaign, a coaBon of 70 national wrtsurrer, erwnronrrental. bbor. 
tarriy farm reirjious arte civc organizations as wei as the 
which also never made it onto the negotiating table. 

Prepared by Pubic Ctaen, a consumer group founded by Ralph Nader. 
For more information ptease contact Lori Watech, (202) 546-4996 215 Pennsytvania Ave, S.E. Washngtori, D.C. 20013 



40 

Mr. Nader. What is so troubling is to hear, yesterday, Vice 
President Gore talk about the promises of his team before the elec- 
tion, without mentioning at all these 12 improvements in NAFTA 
to protect American workers, consumers, and their citizens' rights 
to participate in decisionmaking that he so glibly ignored. 

The side agreements have been questioned as to their legal sta- 
tus under NAFTA and domestic law. I would like to address this 
to the pro-NAFTA people here. 

Do you think, under our constitution, Congressman, the Congress 
can be side stepped by these side agreements and the President of 
the United States can enter into side agreements with a foreign 
country and expose our government to a maximum fine of $20 mil- 
lion without having this agreement go through the U.S. Congress? 
That is unconstitutional. 

Why has President Clinton not sent the side agreements to the 
U.S. Congress? The answer is Newt Gingrich and his band of cor- 
porate indentured Republicans who don't like the, "supra regu- 
latory dimensions of the side agreements," even though they are 
toothless and unenforceable to begin with. 

The White House sent to Congress, on November 5, implement- 
ing legislation for NAFTA which is over 300 pages, knowing that 
the vote on that document and NAFTA would be 12 days later, 
with two weekends, one the extended Veterans Day break in be- 
tween. 

This is not a decent interval, Mr. Chairman, for both the inter- 
ested American public and the Congress, with its various commit- 
tees, to absorb, deliberate, hear, and debate these materials. 

I have associates who have fine law degrees down the street here 
who are trying to pour through these 300 and 400 pages and figure 
out what they mean with their cross-references under a pell-mell 
schedule, hardly having enough time to eat. 

How can other American citizen groups and other labor groups 
have the time when they are out around the country? What is the 
rush? What is the crunch? 

The answer: Ram it through Congress before millions of Ameri- 
cans learn more about NAFTA and the implementing legislation 
and all the goodies in it. 

The White House is pursuing, also, an informal moratorium and 
announced relocations of factories to Mexico until after the NAFTA 
vote in Congress. 

Now look at this for a moment, look at the cynical David Gergen- 
istic shaped White House, this strategy of postponing plant closings 
until after a decisive vote was used in Canada by global corpora- 
tions in 1988. The election there, in 1988, was followed by a rush 
of shutdowns and relocations. 

One of these well-timed closings involved two plants of the Cana- 
dian subsidiary of Gillette, the parent company which President 
Clinton visited a few days ago in Boston. That subsidiary threw 
590 Canadians out of work. It was loaded with debt, which were 
written off under Canadian taxes by the parent corporation in Bos- 
ton. 

Hardly, Mr. Chairman, hardly a model for Mr. Clinton to hold 
up, because now those same plants are going to go south to Mexico 



41 

for the same reasons that the plants in Canada went south to the 
United States, cheaper labor and benefits. 

I sat with Mickey Kantor in April in his office near the White 
House. I asked him why is he for NAFTA? He said because it will 
increase exports. He didn't note that most of the exports are ex- 
porting factory equipment and reassembled products cycled back 
into the United States. He said they are going to go south anyway. 

I suppose that means if the corner of your home has a gasoline 
fire, you just spray it through all the rooms and make it worse in- 
stead of reforming it. 

And then he said something which I think is at the core of 
NAFTA. He said — looking at me straight in the eye — "We must as- 
sure that Salinas can name his successor." 

Imagine, Mr. Chairman, using a trade agreement by the United 
States Government to help perpetrate a dictatorial regime that has 
stolen elections, denied workers the right to form independent 
trade unions, denied Mexicans an independent judiciary, and gen- 
erally destroyed the rule of law for its people and brutalized dis- 
sent. 

Both human rights organizations in Mexico and political oppo- 
nents in Mexico deserve an explanation from President Clinton and 
what they believe to be his taking sides less than 1 year before the 
1994 Mexican elections. 

Chapter 19 of the NAFTA agreement as written by the Bush ad- 
ministration establishes authorities for the binational panels which 
constitutional specialists, ranging from Alan Morrison to Bruce 
Fein, quite different ideologies, believe are unconstitutional. The 
White House has been silent on this matter. 

I hope that the subcommittee will ask the White House for a 
legal opinion on this. These are the binational panels dealing with 
countervailing duties and dumping issues where appointed trade 
officers can overrule officials of the U.S. Government. 

That is patently unconstitutional, and that is what is being 
asked of you to vote on next week. You should get a legal opinion. 
The tri-national panels that decide, among other issues, which of 
our Federal, State, local health and safety and other domestic liv- 
ing standards violate NAFTA and incur penalties, if they are not 
withdrawn, require that the five panel members be trade lawyers. 
Some of these are K Street corporate law firms. 

Now, why isn't there a potential conflict of interest standard to 
make sure that they are not representing two masters? 

There is nothing in what you are asked to vote on on conflict of 
interest. 

Mr. Conyers. Ralph, pardon the interruption. Could you indicate 
how much more time you are going to require? 

Mr. Nader. Yes. Just about 7 more minutes. 

Mr. Conyers. All right. That is fine. Reverend Jackson has never 
waited this long in his career. 

Mr. Nader. We are just trading off. I have waited for him, he 
has waited for me. 

This represents a lot of research, Mr. Chairman. And we have 
not had the opportunity before Congress to put it on the record. 

Mr. Conyers. I am aware of that. That is why these hearings are 
so important. 



42 

Mr. Nader. I would also like the subcommittee to inquire of the 
legal counsel to the President as to whether they are violating 
chapter— title 18, section 1913, lobbying with appropriated moneys. 

As you know, Congress prohibits the executive branch and the 
White House from using tax money to grassroot lobby Congress. 

The two parties have often overlooked this because they believe 
their President, some day, will be a member of their party. I think 
the amount of lobbying out of the White House war room and the 
far-flung use of tax money to contact contributors and others of 
Members of Congress to lobby them to support NAFTA is a prima 
facie violation of this statute, and it should be inquired into. 

I also asked in my letter to President Clinton that he publicly re- 
lease all bilateral letters between the United States and Mexican 
Government, United States and Canadian Government, concerning 
assorted negotiations and side agreements; all letters agreeing to 
negotiations in the future between the respective governments; all 
letters by President Clinton or the administration to Members of 
Congress clarifying, reassuring, and promising, in regard to 
NAFTA; and documents on collateral "pork" such as establishing a 
$10 million research center on international trade at the Univer- 
sity of Texas, just happens to be in Congressman Pickle's district. 

Pro-NAFTA proponents in Congress, Clinton administration, 
business associations, and among narrow-gauged economists, have 
several common characteristics. One is tnat just about none of 
them have read the bulky two volume NAFTA agreement. 

One hundred and fifty economists who signed on to the Clinton 
NAFTA were called by a people's radio network in Florida. Nine- 
teen of them said they read the agreement. The rest said they have 
not read the agreement, including Paul Samuelson. 

I think that illustrates the kind of knee jerk, bandwagon mental- 
ity behind NAFTA. 

Also, it is important to refer to the Joint Economic Committee 
studies debunking the corporate funded think tanks that have put 
out these retable studies saying they are going to be job gains. 

The Joint Economic Committee said there will be at least 5,000 — 
500,000 jobs lost. 

Finally, let me just note that the core question is whether our 
modest democracy should enter into an economic union with a re- 
pressive, dictatorial regime that cannot, will not, and doesn't want 
to enforce the statutes for workers, consumers, parliamentary elec- 
tions, and environment that they have told President Clinton that 
they will enforce. 

I mentioned in my testimony how business people have been 
thrown in jail in Mexico. No due process. They have been harassed 
and intimidated. Some of their stories have been on page 1 of the 
Wall Street Journal. 

I also mention in my testimony that our country needs to nego- 
tiate "pull up" trade agreements so that countries with lower labor, 
consumer, and environmental standards are pulled up by the pacts 
toward our own or even higher standards. 

The majority of the people in Mexico are opposed to this agree- 
ment. The alternative political parties are. The human rights par- 
ties are. And so when Mr. Krugman says that Mexico will turn its 
back and become jingo-istic and exclusive and withdrawn, he may 



43 

be referring to the dictatorial regime. He is not referring to the ma- 
jority of the American — of the Mexican people and the groups who 
want a democracy so their economy can grow, which is the pre- 
requisite for free trade. 

Thank you. 

Mr. Conyers. Thank you for a very important statement, Mr. 
Nader. 

[The prepared statement of Mr. Nader follows:] 



v 






44 



Statement by Ralph Nader 

Before the House Committee on Government Operations 

Subcommittee on Housing, Employment and Aviation, 

U.S. Congress 

on 

The North American Tree Trade Agreement 

November 10, 1993 

Mr. Chairman, and members of the committee, thank you for 
providing me an opportunity to testify before your committee 
today. I request, with the permission of the committee that my 
entire statement and its attachments be made part of the record. 
The North American Free Trade Agreement, NAFTA, as it is called 
by its creators, is not a trade agreement in any traditional 
sense. It is an international autocratic governance agreement 
that deeply invades the internal democratic sovereignty of the 
United States to preserve and advance its own health, safety and 
workplace standards. 

NAFTA will undermine U.S. and state health, safety and 
environmental standards by (1) requiring harmonization of 
standards; (2) imposing limitations on the goals the U.S. may 
pursue in its food safety laws; (3) limiting t.Vie means the U.S. 
may use to promote health, safety and environmental goals; (4) 
requiring the U.S. to permit imports that do not comply with its 
health, safety and environmental standards or face trade 
penalties; and (5) establishing secret tribunals for resolving 
trade challenges, including those directed at health, safety and 
environmental measures, that is stacked against consumer and 
environmental interests. 

According to many knowledgeable observers, NAFTA will have a 

1 



n 



45 



disproportionate impact on African Americans and other 
minorities. 

The key point to remember is that though NAFTA restricts the 
democratic rights of all Americans, it is drawn primarily to 
serve the interests of a narrow special-interest group: the 
owners of large corporations. As the NAACP noted in its July 14, 
1993 resolution opposing NAFTA, "NAFTA is not primarily a free 
trade agreement. Rather it is an investment agreement designed 
to protect investments which U.S. companies make in Mexico." 
Under a NAFTA regime those outside this protected class will be 
especially vulnerable to economic loss. As the NAACP President, 
the Reverend Benjamin Chavis, has pointed out: "African American 
workers could bear the brunt of the downside of the trade 
agreement. The downside is the relocation of American industries 
to Mexico. African American workers are concentrated in urban 
communities and employed by flight -prone industries. These 
industries — textile and apparel factories and auto assembly 
plants — currently have large percentages of African American 
workers. These industries are in communities that already suffer 
high unemployment and are most vulnerable to the social upheaval 
that is brought about by higher unemployment." Similar effects 
can be anticipated by Latinos, Asian Americans and other 
communities. where working people are left with no recourse in the 
face of accelerating corporate flight. 

This month's executive council meeting of the Coalition of 
Black Trade Unionists was reportedly dominated by discussion of 



46 



NAFTA' s deleterious effects, ranging from job loss, to hazardous 
waste exposure, to generalized downward pressure on U.S. wages. 
Bill Lucy, the Coalition president, noted that such NAFTA- 
generated shocks would be especially damaging coming in the 
current economic-political context: "You've got the continued 
drag on the urban economy resulting from the prior recession. 
You've got the federal government unable or unwilling to put 
resources into the community, given its budget deficit, and an 
unwillingness of taxpayers to raise taxes to meet the service 
needs of the community." 

The issue in NAFTA is not a question of how the U.S. will 
fare vis a vis Mexico, but rather how the working people of both 
countries will be impacted by the dealings of each country's 
corporate power brokers. NAFTA exacerbates a vicious cycle of 
exploitation under which Washington further entrenches a 
repressive Mexican regime, which in turn holds down local wages, 
which in turn lure U.S. firms, which in turn leave U.S. workers 
dispossessed and forced to seek retraining from Washington for 
jobs that don't exist. 

The Labor Council for Latin American Advancement (which 
represents 1.5 million Hispanic trade unionists) pointed out in 
its recent statement of opposition to NAFTA that the cycle 
strikes with a sharp racially disproportionate impact. The 
Council noted that "minority workers are more likely to be laid 
off during plant shutdowns and furloughs, with Labor Department 
reports indicating that between 1987 and 1991, 4 9 percent of 



47 



Hispanic workers and 12 percent of black workers were more likely 
than whites to be displaced." It added that, according to the 
Labor Department data, it also "remains more difficult for 
minority workers to find new employment... Of the Latino workers 
displaced from 1985-1989, more than a third were still officially 
unemployed or had dropped out of the labor force as of January, 
1990." 

Everything NAFTA touches becomes more autocratic and less 
democratic, more remote from the public's right to know, partici- 
pate and decide, and more concentrating of power in the hands of 
multinational corporations. From its morbidly secretive 
conception by corporate lobbyists and their governmental allies 
to the secretive, exclusive and essentially unreviewable 
decisions by international tribunals that are wholly alien to our 
country's judicial and administrative law practices, NAFTA 
diminishes U.S. democracy. The trade agreement subordinates 
consumer, environmental and worker health and safety 
considerations to its commercial dictates largely designed by 
global corporations. The repeated drumbeat in the hundreds of 
pages of NAFTA and GATT revisions is that commercial trade 
imperatives — read "corporate mercantilism" — are what 
non-commercial values, such as health, safety and conservation, 
must bend beneath. 

Already, in recent years under trade agreements such as the 
U.S. -Canadian trade agreement and GATT, the General Agreement on 
Tariffs and Trade, nations, provoked by their dominant companies, 



48 



have been challenging internal health, safety and other domestic 
standards as non-tariff trade barriers. Asbestos, acid rain, drug 
prices, policies on raw log exports, tuna-dolphin, milk safety, 
tobacco, recycling, food labelling and auto insurance are some of 
the recent, pending or tentative forays pushing existing trade 
agreement envelopes in anticipation of the giant GO signals for 
such invasions of sovereignty under NAFTA and the GATT revisions. 
While all trade agreements involve some relinquishment of 
national sovereignty — as with setting tariffs — these new 
world corporate order agreements take away too much democratic 
self-determination and replace it with antidemocratic procedures 
and decisions far beyond the reach of voters, consumers, workers 
and taxpayers. 

What's really at work in all of these proposed agreements 
(NAFTA and GATT revisions) is the drive by multinational 
companies to break free from the constraints of national 
sovereignty. They want global commerce, but without democratic 
global law to hold them accountable. 

NAFTA can be described as a "pull down" trade agreement, in 
contrast to the European Economic Community's "pull up" 
conditions placed, for example, upon Spain, Portugal and Greece 
as conditions for entry, such as parliamentary democracies, 
worker safety nets and rights and the like. 

In contrast, by serving to further entrench the Mexican dic- 
tatorial regime and its tight oligarchy of concentrated wealth, 



49 



NAFTA is inimical to the causes of human rights, political and 
economic democracy and to the rule of law that millions of 
Mexicans are seeking in order to uplift their conditions. Lester 
Thurow, the MIT economist, said that Mexico would not qualify for 
entry into the European Economic Community for these reasons. 

Americans are not ready to have their hard-fought standards 
for motor vehicle safety, food safety, fuel efficiency, pollution 
controls, recycling and other conservation measures, to mention a 
few, vulnerable to challenge by foreign countries as non-tariff 
trade barriers before secretive, unreviewable tribunals that 
exclude all citizens from participation and appeal in any real 
sense. Moreover, neither do Americans want to be restrained by 
these tribunals from advancing and strengthening these consumer, 
worker, and environmental standards. It is difficult enough to 
have to deal with Albany, Sacramento and Washington, without 
another layer of autocratic bureaucracy in Mexico City, Geneva 
and Rome making decisions beyond the reach of American citizens. 

NAFTA and the GATT revisions would give foreign countries 
and their powerful corporations a field day in dragging down 
higher standards of living, health and safety in the United 
States to lower country common denominators. These agreements are 
filled with the word "harmonization" which really means for the 
U.S. "harmonization downward" for its standards. Harmonization of 
Mexican and U S. truck safety standards can only mean 
harmonization downward for our more stringent standards. 
Compulsory drug licensing laws are already being repealed (eg. 



50 



Canada) to comply with drug patent requirements in these trade 
agreements and, not incidentally, to begin the increase in drug 
prices in countries which have to "harmonize" with the drug 
industry's demand for drug monopoly patents. In all these 
downward pulls, poorer people receive the far harsher effects on 
their livelihoods. 

NAFTA and the GATT revisions are intended to subordinate our 
democracy and our higher health, safety and environmental 
standards to international autocratic regimes. By pulling these 
standards down, they help keep lower standards down in less 
developed and poorer countries. These trade agreements should be 
defeated by the Congress, and they will be with the aroused and 
informed determination of citizens throughout this country to 
make their positions known to their Representatives. These trade 
agreements need to be defeated and replaced with renegotiated 
"pull up" agreements that defend and advance the economic and 
safety conditions in this country and help less fortunate nations 
to move upward through greater democracy. 

President Clinton, in his pre-election NAFTA address on 
October 4, 1992, listed some specific improvements that had to be 
made to NAFTA (including democratizing its procedures, and adding 
provisions for resource conservation, food and truck safety, 
labor and farmer safeguards etc.) in any side agreements before 
he would declare himself in favor of the pact. About a dozen of 
those improvements never made it to the negotiating table that 
produced the side agreements President Clinton signed a few weeks 



51 



ago with Mexico and Canada. The one precondition that did make 
it through dealt with enforcement and can be described as 
labyrinthic, weak, and unenforceable, as a practical matter, to 
achieve its ends. The top Mexican trade negotiator described it 
to his political colleagues as inconsequential. 

In effect, President Clinton is pressing for the Bush NAFTA. 
The side agreements have been questioned as to their status under 
NAFTA and domestic law. Last week Clinton administration lawyers 
said that if any of the signatory governments withdrew or did not 
comply with the side agreements, they legally would still receive 
the benefits of NAFTA. 

Late on Friday, November 5, 1993, the President sent the 
NAFTA implementing legislation, which is over 300 pages, to 
Congress, knowing the vote on that document and NAFTA would be 12 
days later with two weekends (one the extended Veterans' Day 
break) in between. This is not a decent interval for both the 
interested public and the Congress, with its various committees, 
to absorb, deliberate, hear and debate these materials. 

The White House is pursuing an informal moratorium on 
announced relocations of factories to Mexico until after the 
NAFTA vote in Congress. This strategy of postponing plant 
closings until after a decisive vote was used in Canada in 1988. 
The election was followed by a rush of shutdowns and relocations. 
One of these well-timed closings involved two plants of the 
Canadian subsidiary of Gillette — the parent company which 

8 



52 



President Clinton visited a few days ago in Boston — and threw 
590 Canadians out of work. 

Mickey Kantor, the U.S. Trade Representative, has gone so 
far as to say that NAFTA should be approved because "we must 
assure that Salinas can name his successor." Imagine, using a 
trade agreement to help perpetuate a dictatorial regime that has 
stolen elections, denied workers the right to form independent 
trade unions, denied Mexicans an independent judiciary, and 
generally destroyed the rule of law for the people, and blocked 
law enforcement against the wealthy and the ruling party in one 
brutalized context after another. Both human rights 
organizations and political opponents in Mexico deserve an 
explanation from President Clinton on what they believe to be his 
taking sides less than a year before the 1994 Mexican elections. 

Chapter 19 of the NAFTA agreement, as written by the Bush 
administration, establishes authorities for the bi-national 
panels which constitutional specialists, ranging from Alan 
Morrison to Bruce Fein, believe are unconstitutional. The White 
House has been silent on this matter. 

The tri-national panels that decide, among other issues, 
which of our federal, state and local health, safety and other 
domestic living standards violate NAFTA and incur penalties if 
they are not withdrawn, require that the five panel members be 
trade lawyers. This is a condition rife with potential conflicts 
of interest, but the Bush NAFTA and Clinton side agreements do 
not establish conflict-of-interest standards to keep "conflicted" 



53 



K-Street and other lawyers from these panels. 

There are various categories of official NAFTA-related 
documents which should be publicly released. These include: 

A. All bilateral letters between the U.S. and Mexican 
governments, and the U.S. and Canadian governments 
concerning assorted renegotiations and the side agreements; 

B. All letters agreeing to negotiations in the future 
between the respective governments; 

C. All letters by President Clinton or his administration to 
members of Congress clarifying, reassuring and promising in 
regard to NAFTA; and 

D. Documents on collateral "pork" such as establishing a $10 
million dollar Research Center on International Trade at the 
University of Texas. 

Pro-NAFTA proponents in Congress, the Clinton 
administration, business associations and among narrow-gauged 
economists have several common characteristics. One is that just 
about none of them have read the bulky two volume NAFTA 
agreement . The second is that they view NAFTA in purely economic 
terms, within narrow trade model assumptions, and ignore the 
political and non-law enforcement provisions that embody its 
corporatist ideology. 

10 



54 



As a result, proponents make the most falsely decisive 
predictions about NAFTA' s impact on the U.S., Mexican and 
Canadian economies — predictions that avoid the known empirical 
records of Mexico's dictatorial, repressive regime and the 
current behavior of new U.S. factories operating just across the 
border in Mexico in producing awful polluting and workplace 
conditions. 

NAFTA has not been subject to grassroots discussion and 
debate by the American people who have been shut out by the very 
secretive and autocratic methods that NAFTA-critics have charged 
this supragovernmental agreement with promoting in the future. 
Negotiated in secrecy by Bush functionaries and corporate 
lobbyists, NAFTA moves to Congress under an autocratic "Fast 
Track" law that limits debate to 20 hours and prohibits any 
amendments to this 1,150 page deal. This alone should put up a 
yellow light to citizens who believe in deliberative democracy 
and legislative judgments on what is wrong and what is right in 
these pages. 

The core question is whether our modest democracy should 
enter into an economic union with a repressive dictatorial 
regime, composed of a few very wealthy ruling families, 
government officials and their police power. 

Opponents of the Bush NAFTA say no, because worker, consumer 
and environmental laws in Mexico won't be enforced since the 
ruling oligarchy profits from their non-enforcement. And the 
oppressed Mexican people do not have the democratic rights, 

11 



55 



remedies and free elections to do anything about it. 

As many an American small business person can sadly narrate, 
Mexico is not a place where the rule of law reigns. The rule of 
power, the rule of the bribe (mordida) are what counts. In 
business dealings, Americans have been thrown in jail without due 
process, had their contracts broken, their assets stolen and some 
of their stories reported on page one of the Wall St Journal. 

These businesspeople got a taste of what the ordinary 
Mexican worker, consumer, citizen or brutalized peaceful 
protestors receives regularly. The 60 year long ruling party, 
known as PRI, routinely steals elections, including the 1988 
election that put President Salinas in power. For the masses of 
Mexico there are no independent courts and few civil rights or 
civil liberties, and there is virtually no enforcement of minimum 
wage or pollution laws or laws on worker health and safety. 
Typical of a dictatorial plutocracy, if you are rich, powerful or 
otherwise well-connected, the paper laws can be invoked to 
support your position. 

Laws that are not enforced under NAFTA become unfair 
competitive advantages. For example, an American factory closes 
down in Missouri and goes to Mexico where even weak worker, 
environmental, tax and other laws go unenforced. This 
transplanted factory can then sell its products back into the 
U.S. in competition with a factory that stayed in the U.S. and 
followed the rules. 

What's more, NAFTA, contrary to its proponents' false 

12 



56 



claims, exposes our federal, state and local laws on health and 
safety, for instance, to challenge by foreign countries before 
trade tribunals whose procedural rules prevent citizens and even 
state governments from participating in any way. 

Trade dominates health and safety values under NAFTA and 
revised GATT. It's already happening. Under the U.S. -Canada trade 
agreement of 1988, Canada challenged in a U.S. federal court our 
asbestos phaseout as a trade barrier keeping out Canadian 
asbestos. 

The asbestos phaseout was implemented to protect workers and 
consumers from a very hazardous substance that has taken tens of 
thousands of American lives. 

U.S. citizens have demanded local, state and federal safety 
laws to protect their families, workplaces and the environment. 
Why, they ask, should secret trade tribunals in Mexico City, Rome 
and Geneva contradict what our nation, our states and our local 
governments decide is best for their people in non-trade areas 
such as health and safety? 

In conclusion, first, our country needs to negotiate "pull 
up" trade agreements so that countries with lower labor, consumer 
and environmental standards are pulled up by the pacts toward our 
own or even higher standards. Second, consumer and environmental 
health and safety matters between nations should be dealt with by 
separate treaties and agreements and not subordinated, as under 
NAFTA, to international commercial trade imperatives. Third, 
should NAFTA pass, it will have a long tail next year with the 

13 



57 



expanded invasions of revised GATT coming to Congress, plant 
relocations to Mexico, and the growing awareness of the American 
people that their government in Washington is not looking out for 
their interests. 

Thank you. 



14 



58 

Mr. Conyers. Rev. Jesse Louis Jackson, who, besides being the 
National Rainbow Coalition president, is the only African American 
to have been a major Presidential candidate, garnering somewhere 
in the neighborhood of 7 million votes. 

He has registered more people in America than anyone else. He 
has probably walked more picket lines, served in more attempts to 
bring common ground to people of all race, class, and gender, not 
only in this country but throughout the world. 

He is now the U.S. Senator from Washington, DC, an elected po- 
sition in which his advocacy for Statehood is well-known. 

There are other things that we could say about Reverend Jack- 
son, but it is far more important that he make a statement on this 
important subject, and I am pleased that his schedule would per- 
mit him to join us here this afternoon. 

STATEMENT OF JESSE JACKSON, PRESIDENT, NATIONAL 

RAINBOW COALITION 

Mr. Jackson. Thank you, Mr. Chairman, Chairman Peterson, 
Congresspersons Collins, Zeliff, and Shays. 

Let me express my thanks for the opportunity to testify before 
you today, to express my thanks to Ralph Nader for his research 
and diligence and commitment. 

Ralph Nader and I have tried diligently, in the course of the last 
few days, to make ourselves available to President Clinton and Al 
Gore to debate with them as Gore did with Perot last night. 

We would be anxious to have a face-to-face format under any 
conditions that they set up. 

I am amazed at President Clinton trying to ram down the 
throats of the American people the policies of the man that he de- 
feated. 

The Head of State in Canada who was one of the architects of 
this plan has been defeated, virtually 178 to 2. A co-architect, Mr. 
Bush, was defeated. And if the people in Mexico could vote and 
their vote counted, Mr. Salinas would be defeated as well. 

The people of Canada, the United States, and Mexico have re- 
jected this proposition. We, as a Nation at our best, established 
several basic principles of foreign policy, international law, and 
self-determination, human rights, economic justice. Mexico falls 
short on all four planks. 

I am a bit ashamed to see so many Democrats who we thought 
had changed their character but only changed their politics. 

Some of the same Democrats who tolerated, over 1964 and 1965, 
the horrendous conditions in which blacks and Mexican-Americans 
lived, are now willing to shift that same toleration south of the Rio 
Grande. Those who tolerated racial oppression, gender inequality, 
worker exploitation, changed their behavior only when the law 
changed in this country. 

They were willing — they were often willing to wink at enforce- 
ment and now shift south of the border to Mexico. 

I want to make this clear to the foes and the supporters. I believe 
in the deliberative track with Mexico, not a fast track. A delibera- 
tive track will give us time to think it through and work it out. We 
share 2,000 miles of border with 90 million Mexican neighbors, our 
allies. Neither of us are going anywhere any time soon. We need 



59 

a deliberative track, not a fast track, and to build a bridge between 
the United States and Mexico and not a cliff. 

My interests are neither narrow and nationalistic, nor protection- 
ist, nor racist. I want a mutually beneficial fair deal for Mexicans, 
Americans, and Canadians. 

For the record, I believe in free trade and fair trade; but I further 
want to argue that I would support a United States-Canadian 
Mexican common market, not a free trade zone. It does not take 
into account common market considerations. 

If Mexican workers could make just $4.25 an hour, it would im- 
prove their conditions. Furthermore, it would enable them to buy 
what we produce. And, thus, it would be growth for them and ex- 
pansion for us, a mutually beneficial arrangement. 

I can see how most right wing Republicans can wink their eye 
at Mexican conditions. They did so in South Carolina where I grew 
up, in Mississippi, Alabama, and Georgia. I can understand that 
orientation. But not for this new group of enlightened Democrats 
in 1993. It is a great source of disappointment as we debate this 
rather divisive, unnecessarily divisive issue. 

There is a great deal of pain in our Nation today, perhaps as 
much as I have ever witnessed. In my work, I travel a good deal 
and have the opportunity to talk with working people all across the 
country. They want to abandon — to have hope, to believe that the 
future holds promise for themselves and their children. They want 
a job that pays enough to feed them and their families. 

They don't want workfare. They don't need welfare. They just 
want to work and to get paid. When they work, they want to know 
that theirjob will be there as long as they have a chance to be pro- 
ductive. They want to know that if their babies get sick, they can 
get medical care. 

As we approach the 21st century as the wealthiest and the most 
powerful Nation in the history of the world, these wants and needs 
are all too often not being met. 

Among our brothers and sisters in the minority communities, the 
absence of a good job has become the norm. We have become so- 
cially conditioned to high urban unemployment. Sadly, too many of 
us have come to accept these conditions as a modern fact of life. 

In 1992, however, the Nation voted overwhelmingly for change. 
They voted to replace a President who was so far removed from the 
average American, he proclaimed the discovery of the bar code 
when lie visited the supermarket during his campaign. 

The theme of the campaign was, "It is the economy, stupid" and 
the issue, was jobs, jobs, jobs. President Clinton campaigned on a 
putting-people-first platform and promised high-tech jobs, retrain- 
ing programs, substantial investment in our Nation's future, health 
care, improved labor relations, indeed, economic stimulus. 

NAFTA is economic hemorrhage. Unfortunately, his $200 billion, 
4-year investment plan was reduced to $16 billion and then shrunk 
to only a few hundred million by the deficit hogs. 

One of the — the wonderful job training program virtually dis- 
appeared from the budget. We face a crisis in our cities, plants 
closing, jobs leaving, tax base eroding, school systems traumatized 
and the urban policy, more police rather than more teachers, more 



60 

jails rather than more schools, more mandatory sentencing and 
more ways to electrocute. We need to go another way. 

Today there are 16 to 18 million people unemployed or under- 
employed. We include those who are involuntarily working part 
time, those who have given up looking. 

Official black unemployment is 13 percent, with Hispanic unem- 
ployment at 11 percent. Among our young black people, unemploy- 
ment is over 40 percent; Hispanic teenage unemployment, 30 per- 
cent; Native Americans, around 50 percent. These figures for un- 
employment are shocking. 

What is even more shocking is when you look at life for many 
of those lucky enough to find jobs. Among the 19 — according to the 
1990 census, 14.4 million year-round, full-time workers, 18 percent 
of the total, earn below the poverty level of $14,000 per year. 

So we can see that as we contemplate these numbers that we are 
failing to create jobs that can support a family. When plants close, 
manufacturing workers, all too often, are forced on to low-paying, 
no benefit jobs in the service industry. 

The fact is the workers that will be hurt by this deal — the textile 
workers, all 600,000 of them, the other workers, electronics work- 
ers — there is no promise these workers will get a job when their 
jobs leave. They are simply being left to be expended and run 
through. And it is not fair. 

In this context, we must view the North American Free Trade 
Agreement — which I wish were a North American common market, 
long-term plan; before we did Europe and Japan, the Marshall and 
MacArthur Plan — a long-term development plan that was mutually 
beneficial. It let them grow and let us expand. 

Mexicans deserve no less of a development plan than Europeans 
and the Japanese had. There are two sets of rules on the develop- 
ment of Europe and Japan, over and against Mexico, which is next 
door. 

Let us remember that this agreement was negotiated in secret by 
the Bush administration. Workers, environmentalists, farmers and 
consumer advocates were not at the table; and yet workers, farm- 
ers, environmentalists, and consumer advocates are affected by 
this. 

We never voted on this. Nor were our representatives at the 
table to even to deliberate and put forth what was then called a 
fast-track, trickle down theory. 

It was conceived of as a source of enormous profits for Mr. Bush's 
friends in high places in multinational corporations: Profits up, 
wages down, workers busted. 

Mr. Clinton understood this as a candidate, made this case, cri- 
tique the shortcomings of Bush's NAFTA in his October 4, speech. 
Unfortunately, Mr. Clinton's solutions — namely the supplemental 
agreements — fall far short of dealing with the fundamental prob- 
lem of NAFTA, which is that there cannot be a free trade agree- 
ment between nations with such huge disparities in their econo- 
mies and their political systems. 

We share 2,000 miles of border with Mexico. The biggest dispar- 
ity between two neighbors in the world. And that is why we must 
end the cliff and create a bridge in that sense to develop them both. 



61 

Why do I make the case, Mr. Shays, for common market? It was 
a sound idea for you to talk about having a common market. But 
Spain, Greece, and Portugal are substantially below their living 
stands. If they just signed that deal, all the jobs would have gone 
rolling over into the poorer countries and the profits in the wealthi- 
er ones. They took the time to work out a social contract and build 
a relationship and reduce the hostilities. 

Right now many Americans are screaming that Mexicans are 
taking our jobs, which is not true. And the more they say it, the 
more racist it sounds. Racist. Mexicans are not taking jobs from us. 
United States corporations are taking jobs to Mexico to exploit 
them and undercut our own workers. Mexicans are not taking jobs 
from us. 

The U.S. Government is greasing the skids for the heavy inves- 
tors, the high political rollers, to take the plants there. And when 
these large agri-businesses, ConAgra, Cargrill, are rolling over into 
Mexico, those Mexican farmers will be put out of business; and 
they will come dashing across the border to meet other depressed 
unemployed American family farmers. 

Look at how this agreement will affect African Americans. In all 
these talk shows they have not quite made room to hear our point 
of view. That is why we tried to get on that debate last night, be- 
cause we have a point of view different than Mr. Perot's point of 
view, a point of view different than Pat Buchanan's point of view. 

And ours is not narrowly nationalistic. It is not building a wall. 
It is not racist. It is notprotectionist. It is discussing a mutually 
beneficial arrangement. The hardest hit industries are expected to 
include the apparel, and automobile manufacturing, food process- 
ing, and electronic assembly. All employ large numbers of minori- 
ties and women. 

Latino workers are more likely to have nonmanagerial jobs and 
working in inner cities and rural areas where job loss to Mexico 
aren't likely to be replaced. 

NAFTA contains no language providing financial assistance, job 
training, or alternative employment for United States workers 
whose jobs are relocated to Mexico. 

Experience clearly illustrates the greater difficulty of black and 
Latino workers at finding new jobs that pay them comparable 
wages where they have been displaced from manufacturing jobs. 
That will be true if this deal goes through. 

Since Mr. Nader has dealt in some detail with some other rami- 
fication, let me give you simply one deal about this secret five-per- 
son czar board. 

Suppose in Michigan, Congressman Conyers, that there is an 
electronics company finally owned by an African American, owned 
by a Latino. And finally, because they live in something called the 
enterprise zone in urban Detroit, they live in the enterprise zone, 
now the government makes them a long-term business loan, Con- 
gresswoman Collins, in that zone. And the pigeon bonds from UAW 
are used to help subsidize that company in the urban enterprise 
zone to make it competitive with whites who have not faced redlin- 
ing, to bring them up. And then the Mexican Government protests 
that arrangement as, in fact, blocking them. Those workers cannot 
then go to court and make a case. They must face a five-person 



62 

board of adjudicators who are completely unaccountable because, 
all of a sudden, now the domestic enterprise zone is not encom- 
passed with the new international free trade zone. 

I rest my case. 

Mr. Conyers. Thank you so much, Reverend Jackson and Ralph 
Nader. 

Bill Zeliff, you have been very courteous in listening to the cases 
presented by our two witnesses, and I would like to recognize you 
now. 

Mr. Zeliff. Thank you very much, Mr. Chairman. I will start 
with Ralph Nader. 

If in New Hampshire — first, your reference to the New Hamp- 
shire legislature and the offer to give me background material. I 
would love to have that, if you believe that NAFTA will accelerate 
job loss in the United States and put downward pressure on wages 
and working conditions. 

Having said that, and with that in mind, how do you respond to 
the following facts: AFL-CIO testified against the Caribbean Basin 
Initiative in 1982 believing that freer trade with those lower-wage 
nations would serve only to weaken the U.S. industrial base? 

In only 4 years, the U.S. trade balance increased from a 1986 
deficit of $200 million to a 1990 trade balance of $1.8 billion, and 
U.S. exports to the Caribbean Basin Initiative countries increased 
from $5.6 billion to $9.3 billion, an average increase of 12.1 percent 
per year. 

Mr. Nader. Well, I don't know what those figures are based on. 
That could be export capital equipment. It could be subsidized ex- 
ports under the Caribbean initiative. It could be any number of 
things. 

I am just putting a common sense proposition before you. If you 
have a stable dictatorship that protects United States investment, 
if you have brand-new equipment and Mexican workers are trained 
to use this new equipment, they are making $1 an hour, how can 
workers in the United States, at $10 or $15 an hour compete? 

Now maybe there is some sort of fool's gold that we are not 
aware of, but it does seem that there is a substantial lure and pull, 
especially since they don't have to invest in pollution control equip- 
ment south of the border. 

Mr. Zeliff. One of the things that — first let me compliment you 
on the detail and the commitment that you have made to this 
project. You, obviously, have spent a lot of time on it. 

One of the things that we learned, Mr. Chairman, from our 
trip — and we had a chance to go down and visit along the border 
as well as Chihuahua, inland, and Mexico City. We covered a lot 
of ground in 4 days and asked the question to get at the average 
wage. And the average wage is more like $3.61 an hour. Admit- 
tedly, not everyone is at minimum wage. It includes some benefits 
at well, like vacation benefits, Christmas benefits, health care 
plans, social security. 

Admittedly, you know, I think that there is a variance. And we 
are trying to get at some of the — some of the facts here. 

In looking at the trade since 1986, the balance of trade in Amer- 
ica and Mexico, we have gone from a $4.9 billion negative balance 
to a $6 billion plus. 



63 

In New Hampshire, we have gone — 2Vfc times increased exports 
since 1986. 

How would you look at that relative to the discussion and the 
presentation of your material? 

Mr. Nader. Well, as you know, my principal emphasis is on the 
diminishing of our democratic rights here on the health and safety, 
nontarifF trade barriers. 

But just to give you an example, in Michigan, a plant with 1,100 
workers in two stages, closed down; the workers were laid off; and 
it was shipped to Mexico. 

On the last day of the plant's operation, the women who were 
working there were packing their tools and sending them down to 
Mexico. The value of those tools are part of the billions of dollars 
in exports that Vice President Gore referred to last night. 

Mexico, as you know, was very, shall we say, nationalistic, until 
a few years ago. So there is an antagonism to bringing in some of 
this capital equipment. But if this capital equipment is replacing 
jobs in this country, in order to relocate them in Mexico, that looks 
good on the export line, doesn't it? 

But we know what it really means in the long run. 

Mr. Zeliff. Well, and, again, there are obviously major points of 
disagreement. Some would say that, as capital is invested and as 
Mexico improves their economy and raises their standard of living, 
they will be able to buy more American imports. 

Presently they spend 70 cents on $1 of import dollar on American 
goods. The better their economy is, the better their standard of liv- 
ing over the next few years, the more they are going to have to be 
able to spend on our exports, their imports. 

Mr. Jackson. Would you apply that logic to Cuba? 

Mr. Zeliff. Well, we are not dealing with Cuba right now. But 
that is an interesting question. 

Mr. Jackson. People who speak Spanish, both of them in the 
same hemisphere, both same principle, both of them dictators. I am 
just asking you to apply the same principle. 

Mr. Zeliff. Let me just mention to you, Jesse, that you mention 
it was the Bush document. And, again, I respect the commitment 
that you made and the detail and the hard work that you put forth. 
This was a Reagan initiative. This goes back to 1982. 

Mr. Jackson. I apologize. 

Mr. Zeliff. No. No. It is not a matter of apology. But I want to 
make a point. 

There have been over 10 years of meetings, over 1,000 public 
meetings. And I think, you know, in terms of it being negotiated 
in secret, I think there is a lot to be said that this has been a long- 
term project. And I just would like to make that point. 

I would also like to make a point, as far as jobs moving south, 
we have a firm, Clarastat, in Dover, that moved about 1 year ago 
to Mexico. And they folded up their tent, went down. They would 
have moved anyway, and other firms have that ability to move 
south now. 

Mr. Jackson. Mr. Zeliff, let me make this point clear, because, 
in this instance, you know, we may not be as far apart as the 
image is if we think this thing through a minute. 



64 

I believe in free trade. I believe the core of it must be fair trade. 
I believe in free press, must be fair press. I believe we should not 
have a wall between us and Mexico. I believe that we should work 
out a mutually beneficial trade arrangement. 

The tension over free traders in this deal is that there is a cliff 
that people are falling off of rather than a bridge to go across. 

Now, if Mr. Clinton had modified this to include a real commit- 
ment to their democratic institutions being developed, for example, 
strong, independent free trade unions, which is infrastructure de- 
velopment, and credible elections, and their well-founded economic 
development, North American Development Bank on both sides of 
the Rio Grand and raised their minimum wage with enforceable 
laws on environment, it is a good deal. 

What is the big deal about not demanding of Mexico democratic 
institutions as a prerequisite for joining this proposition? It is what 
we did to Spain, Greece, and Portugal. It just — I am only asking 
that we be consistent. 

That is why, when people start talking about building walls be- 
tween us and Mexico, and they are against NAFTA, they are not 
talking about what I am talking about when they start talking 
some narrow nationalism about America first and isolation. We are 
not talking about the same thing. 

We are talking about we should have an economic common mar- 
ket with Mexico, not just something called free trade zone. 

Mr. Zeuff. But Mexico is emerging. Their economy is emerging 
and growing. They have tremendous gains since 1986, since they 
joined the GATT. 

Mr. Jackson. Their unions are not emerging and growing. Their 
democratic elections are not emerging and growing. Their courts 
are not emerging and growing. 

We are in a mess right now in Haiti, because we got money on 
both sides of the deal. We invested in dictators. We trained the 
military that is now defying us. We made them. We trained them. 
We armed them. 

Then we went from supporting the dictatorial element that se- 
cured our cheap labor base in Mexico — I mean in Haiti. They over- 
threw a government that wanted to raise minimum wage to 50 
cents an hour. 

Now we are supporting the democratization of Haiti. Now we are 
trapped on both sides. We are on both sides of that war. So why 
make the same mistake again? 

Mr. Nader. You know that if you compare productivity and 
wages in Mexico in 1980, that is the base year, the productivity is 
up over 40 percent. The wages are down 30 percent. The wages 
today are higher in Mexico than they were in 1987. But in 19 — at 
the base year of 1980, 13 years, productivity up, wages down, ad- 
justed for inflation. 

Why? Because of the Mexican dictatorial government's cheap 
labor repression. 

And so how can you have a level playing field between a democ- 
racy and a dictatorship and these free trade principles? 

Mr. Zeliff. I will try to answer that. But I got to let my turn — 
let somebody else take a turn according to the chairman here. I 
will try to get to that. 



65 

Mr. Conyers. Thank you very much, Bill. 

Collin Peterson, the subcommittee chairman, has begun a series 
of hearings that date back to May of this year. This is the ninth 
hearing. We have heard people from all points of view, in and out 
of government. 

And I wanted to take this moment to commend him and recog- 
nize him for any observations that he may have at this point. 

Mr. Peterson. Thank you, Mr. Chairman. I want to thank the 
staff and your staff for helping us. I think we have dug up a lot 
of good information which obviously hasn't changed my point of 
view. 

But, Mr. Nader, I want to talk about one of the things that hap- 
pened as I was studying this. You may or may not be aware of our 
situation with wheat in the Canadian agreement, where our nego- 
tiators either — they either knew better or they — it is hard to know 
what they were up to. 

Anyway, they screwed up, and Mexico — or Canada has a 50 cent 
a bushel rail subsidy. And they allowed that to be written into the 
agreement. This is just one of the things that they missed. And so 
we used to have three-fourths of the Mexican wheat and barley 
market, and now the Canadians have three-fourths of the market. 

We took this to a panel. The panel met, had two Americans, one 
Canadian. We lost. So when I started looking into this, figuring, 
you know, I started asking questions: How do you get on this 
panel? Who are these people? 

And the more you look into this, I mean this is a great deal. And 
I think all of us want to have fair trade. We want to make things 
better for all of us in North America. But I think from my looking 
at this, if we are ever going to accomplish that, we have got to put 
some light on the way this trade office operates and the way this 
whole operation operates. I mean it is a great deal. 

You know, these big corporations have folks on their payroll that 
follow these people around. I think they purposely keep this trade 
office small so that they don't let anybody else into it. It is only the 
Cargill-types that get appointed and all of those that end up within 
this trade office. 

So I guess my question to you is: Is there some way that we can 
put some spotlight on this once we defeat NAFTA and try to put 
some pressure on to change the way that we do these trade nego- 
tiations so we can get ordinary people involved and we — you know, 
I don't think the American people understand that these things are 
all done in secret, that you can't find out what is going on. 

I think both of you have really done an excellent job today in 
pointing out some very good information. I wish you would have 
been there last night debating the Vice President. 

Mr. Jackson. We tried. 

Mr. Peterson. So I guess I- 



Mr. Nader. I think you point- 



Mr. Peterson. If there is some way, we would like to work with 
you to try to expose this and see if we can do something to change 
this, because we have got the GATT thing coming right along after 
this. That is worse than NAFTA. 



66 

And I don't think any of this is going to change unless we change 
the process within that trade office. And I don't know if you have 
any ideas on how to go about this or any information. 

Mr. Nader. Yes. I think you are quite correct. 

Increasingly, decisions relating to international trade by our gov- 
ernment and adjudications are pulling further and further away 
from our Administrative Procedure Act, our openness, public dock- 
et, review in the courts. So you have basically an extrajudicial 
arena of secret decisionmaking that is unaccountable. 

You remember the truck example I just gave earlier? Well, that 
was an amendment to the Code of Federal Regulation. And that 
should have been open for public docket, 30-day notice, and review 
in our courts. 

Instead, what did the Department of Transportation say? Well, 
it deals with international trade; therefore, it can be viewed as a 
technical amendment with no comment, no deliberation, and no re- 
view in the courts. That is it. 

So I think you put your finger on it, is that international trade 
and investment issues, already subject to closed door bureaucratic, 
banking, corporate deliberations, and decisionmaking excluding the 
American people, has moved to withdraw from our democratic ap- 
paratus in the decisionmaking. 

I mean there is no basis for closing those tribunals. There is no 
basis for your State of Minnesota or your State of New Hampshire, 
who would have a stake on a particular issue involving your legis- 
lation before these international tribunals, to be completely shut 
out of being a party before these tribunals. 

There is no reason why all the submissions by our government 
are secret from us so we can't even figure out whether the State 
Department is really making a strong case or throwing the case. 

Mercedes now is challenging the U.S. Government under GATT 
saying our fuel efficiency standards and gas guzzling standards vio- 
late GATT because of its discriminatory impact on Mercedes. Why? 
Because it happens to have a large sedan. Well, big deal. These 
standards apply to all cars, import or domestic. 

But you see they are tying us up, and they are tying us up. And 
that is a very demoralizing thing to say to citizens back home. You 
not only have to deal with Minnesota and Washington, you got to 
deal with Geneva and Rome. 

Mr. Peterson. I think there is a very good reason why these 
things were secret, because they can't stand the light of day. If peo- 
ple knew what was going on, there would be an uprising. 

And I guess one of the reasons NAFTA is in trouble is that a lot 
of us that used to support these agreements finally woke up and, 
you know, we just can't take this any more. This being asked to 
compete with $1 an hour wages when nobody else, all of these folks 
sitting over in the White House, none of their jobs are in jeopardy, 
none of them have to compete in the world market. 

Mr. Jackson. So far. 

Mr. Peterson. And I said time and time again, if we could get 
all these lawyers to get to the world market price of lawyers — 
which I did a study and it is about $18,000. If we could get them 
so they were in the world market, not only would they be cheaper 



67 

to hire but, you know, we could maybe export some of these law- 
yers to Japan and screw up their economy for a while. 

But 

Mr. Jackson. It is just — Mr. Peterson, it is just so unfair to set 
the stage as those who are driven by fear and those who are driven 
by courage or those who are willing to compete and those who are 
not. 

The White House does not want to compete with an arrangement 
where votes are not counted. They don't want to compete with Mr. 
Salinas' political situation. 

It is not fair. The American worker can compete with the Mexi- 
can workers. We can't compete with 95 cents an hour wages and 
shouldn't have to. The Zenith workers on the West side of Chicago, 
now urban, black, brown unemployed, could compete with the Ze- 
nith workers and maquiladora workers but could not compete with 
the wage shift and exploitation factor. And that is why this is such 
a big lie. 

And Mr. Clinton has had the opportunity to modify a bad propo- 
sition because two-thirds of the signatories have been defeated. 
And the other third can't vote. This is an excellent opportunity. 
The idea about, if we change it, the Mexicans are going to balk, 
they don't have the capacity to balk. They need the deal too much. 
And it is mutually beneficial, we need it too. But it should be a fair 
deal. And it is going to be defeated. 

Mr. Conyers. The Chair is in some doubt about how to treat it. 
The esteemed gentleman from Connecticut has the next question, 
but our colleague on the committee, Barbara-Rose Collins, has a 
statement that I know she wants to make, and I am not at all sure 
she will be able to return. 

Mr. Shays. Can I resolve the question? Are you gentlemen free 
to stay if I run and vote, back in 10 minutes? 

Mr. Conyers. No. Reverend Jackson is on a short schedule too. 

Mr. Shays. I would defer to Representative Collins. 

STATEMENT OF HON. BARBARA-ROSE COLLINS, A REP- 
RESENTATIVE IN CONGRESS FROM THE STATE OF MICHI- 
GAN, AND CHAIRWOMAN, ANTI-NAFTA TASK FORCE, CON- 
GRESSIONAL BLACK CAUCUS 

Ms. Collins. Mr. Chairman, I don't have time really to make my 
statement. 

First of all, I want to commend you 

Mr. Conyers. Let me thank Chris Shays for his support. 

Ms. Collins. I want to thank you and Chairman Peterson of the 
subcommittee for holding these hearings. I think they have been 
very informative to the Congress, and you performed a great serv- 
ice to us. 

I am here in my capacity as chairwoman of the anti-NAFTA task 
force for the Congressional Black Caucus. And I wanted to share 
with you our concerns about NAFTA's impact on African-Americans 
and on affirmative action and on minority and disadvantaged busi- 
nesses, but I won't have time to do that. So I would like to ask you 
to insert my remarks in the record. 



68 

Also, Mr. Michael Moore has given you a video and a statement. 
I would like unanimous consent to insert his into the record also. 
Is that permissible? 

Mr. CoNYERS. I would love to do the latter. Michael Moore 

Ms. Collins. You mean the former. 

Mr. Conyers. Michael Moore was trying to get here, and I've had 
the opportunity to briefly examine his video which is excellent. Un- 
fortunately, videos don't translate into the record, but I know that 
he does have a statement. And his representative is here, and we 
will include that in the record. That is acceptable. 

[The prepared statement of Mr. Moore follows:! 



69 



/ 

Testimony of Mr. Michael Moore, Producer/Writer/Director & Creator of the Film 
"Roger & Me" as submitted in written & video form on his behalf by his associate, 
Mr. Sam Riddle, to the Committee On Government Operations Subcommittee on 
Employment, Housing and Aviation; at a hearing on the potential impact of the 
North American Free Trade Agreement (NAFTA) on blue collar and minority 
employment in the United States on 10 November 1993. 



I made a film, "Roger & Me", about my home town, Flint, Michigan because 
workers in Flint were hurting in the worst way due to inhumane treatment at the 
hands of General Motors leadership. No one seemed to care and the impact of 
plant closings was buried. I had to "do something", so I made the film to let the 
world know of the suffering and pain of Flint. 

If NAFTA is enacted, I am convinced that the story of Flint, Michigan will be 
repeated throughout America. You should not allow that to happen for several 
reasons: 

(1) President Clinton said that the Bush NAFTA would not be good for working 
people in America.- But the so called "side agreements" on the environment and 
labor rights which would differentiate Clinton's NAFTA from the Bush NAFTA 
have no teeth and result in a bottom line reality of Bush's NAFTA still standing 
strong. Members of Congress who opposed Bush's NAFTA should be consistent 
and reject NAFTA as currently structured. 

(2) NAFTA is the clearest manifestation of institutional racism in recent memory. 
Nearly a quarter (24%) of the UA W membership is African -American. Downsizing 
at General Motors and other auto manufacturers is a way for the corporate giants 
to lay the foundation to exploit a cheap Mexican labor force as African-Americans 
face the prospect of losing jobs at a disproportionate level. 

An erosion of the tax base of urban America will occur as corporate giants go 
south. Again, people of color will be impacted negatively in disproportionate 
numbers as services and social programs are cut. 

(3) There is no concrete plan for worker retraining which would meet the demands 
of the high tech job market which could employ some of the victims of NAFTA. 

There is more which is contained in the video presentation before you. I 

respectfully thank you for allowing us time to make this presentation. Please 

address any concerns to me c/o Sam Riddle 

P.O. Box 3062 Warrenton, VA 22186. Phone 416/368-2636 for a more immediate 

response. 

Thank you. 



70 




The 

Congressional 
Black 
Caucus 



POSITION PAPER 



North Americ an Free Trade Agreement 

The Congressional Black Caucus stands in opposition to the North American Free 
Trade Agreement (NAFTA). While It is recognized that NAFTA was originally 
proposed to help spur economic growth within the United States through increased 
trade and increased competition in the global marketplace, there are areas of concern 
that have not been addressed. Without sufficient attention to the areas of concern, 
the Congressional Black Caucus will remain firm in opposition. 

AREAS OF CONCERN 

Opposition principally It focused on factors affecting lobs, the environment, minority business opportunities 
end the potential effects on the Caribbean region. 

e JOBS - Our trade deficit with Mexico has already grown In many Industries. Estimates of 

probable job losses due to NAFTA have reached as high as one million. State and local 
governments win lose tax revenues from businesses who relocate and Individuals who 
become Jobless. In those regions that suffer the most Intense Job tosses, the corresponding 
loss of tax revenues win be substantial. NAFTA will have a negative impact on the 
generation of revenues In this country precisely at a time when entitlement benefits and 
services are under greet perl. Also, an examination of the average hourly wages for 
production workers In those Industries already affected reveals that the jobs being lost are 
high- wags, not only low-wage manufacturing lobs. Those who lose lobs because of Import 
competition do not climb up the ladder, but fal back to tower wages or fall off the Job 
ladder into unemployment. There Is little to support the claim of NAFTA proponents that 
free trade wi create higher wage Jobs for U.S. workers because Mexican workers will take 
jobs at the lower end of the skills ladder while American workers will move up to better 
paying Jobs. 

e ENVIRONMENT - There has not been sufficient progress mede with Mexico related to 

environmental protection. NAFTA must preserve the rights of states end the federal 
government to set high Individual standards for the environment, conservation, health and 
safety. NAFTA does not provide a secure, dedicated source of funding for border clean-up, 
environmental Infrastructure, conservation initiatives, protection of communities and 
worker health. The treaty does not prevent the flight of Industries which seek to take 
advantage of lex environmental, health and safety standards In other countries. Further, 
there are not sufficient opportunities for pubic participation In trade and environmental ' 

disputes and In investment and trade decisions affecting Individual communities. 

e MINORITY BUSINESS - The Minority Business Community has never been fuOy consulted 

or considered on NAFTA. There ere no current proposals to provide technical, financial, 
marketing or educational assistance to small business in general, or to minority business 
In particular, interested In trade with or investment in Mexico. Remedies must be carefully 
explored and should accompany the NAFTA. 

e THE CARIBBEAN • Preferential treatment for Mexico • especially In areas of sugar, citrus 

and apparel - could result In significant diversion of trade from the Caribbean. Such a 
diversion would stall economic growth, and dislocate productive activity in both the United 
States snd the Caribbean. H NAFTA takes effect In January, U.S./Cerlbbean commerce 
could erode by next spring. Using the textile industry as an example, NAFTA calls for s 
progressive reduction of tariffs on Mexican textiles and apparel over the next decade. This 
disrupts U.S. and regional patterns, because Caribbean Basin Initiative garments made from 
U.S. textiles would compete at a disadvantage with Mexican apparel made from Mexican 
textiles. 

NAFTA Is not primarily a free trade agreement. It is an investment agreement 
designed to protect investments which U.S. companies would make in Mexico. The 
Congressional Black Caucus stands In strong opposition to this treaty as drafted. 



2022267791 



01-03-94 11:38AM P001 B26 



71 

Ms. Collins. All right. Thank you. 

Would you please forgive me for not being able to come back? 
And I ask you to insert my remarks. 
Mr. Conyers. Without objection, so ordered. 
[The prepared statement of Ms. Collins follows:] 



72 



TESTIMONY OF THE HONORABLE BARBARA-ROSE COLLINS (D-MI) 

November 10, 1993 

for the hearing on 
NAFTA: A Negative Impact on Blue Collar, 
Minority, and Female Workers? 

before the Subcommittee on 
Employment, Housing, and Aviation 



MR. CHAIRMAN, AS A MEMBER OF THIS SUBCOMMITTEE, I WANT TO 
THANK YOU AND COMMEND YOU FOR HOLDING TODAY'S HEARING ON THE 
IMPACT OF THE NORTH AMERICAN FREE TRADE AGREEMENT ON THIS 
NATION'S MINORITY, BLUE COLLAR AND FEMALE CITIZENS. 

I AM ESPECIALLY PLEASED TO APPEAR HERE TODAY AS THE 
CHAIRPERSON OF THE CONGRESSIONAL BLACK CAUCUS ANTI -NAFTA TASK 
FORCE. THE CBC CONTINUES TO MAINTAIN ITS OFFICIAL STAND IN 
OPPOSITION TO THE NORTH AMERICAN FREE TRADE AGREEMENT. THIS IS 
AN ISSUE OF SUBSTANCE, NOT SOUNDBITES. THIS IS NOT A CHOICE 
BETWEEN PRESIDENT CLINTON AND ROSS PEROT OR PAROCHIALISM VERSUS 
THE GLOBAL MARKETPLACE. 

THE VOTE WE WILL CAST ON NOVEMBER 17 IS A VOTE TO PROTECT 
JOBS IN AMERICA, TO PROTECT THE ENVIRONMENT OF THE WESTERN 
HEMISPHERE, TO SUSTAIN THE ECONOMIC BASE FOR SMALL AND MINORITY 
BUSINESS OPPORTUNITY, AND TO INTRODUCE A MORE EQUITABLE POSTURE 
TO OUR TRADE RELATIONS IN THE CARIBBEAN. 

THROUGHOUT THE NEARLY 3 YEARS OF DEBATE ON NAFTA, THERE IS 
ONE ISSUE OF SPECIAL IMPORTANCE TO ME THAT I BELIEVE HAS BEEN 
GIVEN A BACK SEAT -- THE ISSUE OF NAFTA' S IMPACT ON MINORITY, 
PARTICULARLY AFRICAN-AMERICAN, COMMUNITIES. THEREFORE, I AM 
PLEASED TO HAVE A FORUM TO DISCUSS MY CONCERNS ABOUT NAFTA. 

IN THE VOLUMINOUS AND SOMETIMES TURBULENT PUBLIC DEBATE OVER 
NAFTA, LITTLE ATTENTION HAS BEEN PAID TO THE HARM THAT NAFTA WILL 
SPREAD TO AFRICAN-AMERICAN COMMUNITIES. IN FACT, IT ALMOST 
APPEARS THAT THE NAFTA AGREEMENT WAS DRAFTED WITHOUT ANY 
SENSITIVITY TO MINORITIES. PERHAPS NAFTA' S ORIGINATORS, THE BUSH 
ADMINISTRATION, THOUGHT THAT WE WOULD STAND BACK AND STAY SILENT, 
THAT BECAUSE WE HAD NO INTEREST IN THIS AGREEMENT, WE WOULD GIVE 
SILENT ACQUIESCENCE. BUT NOW, AS THE CONGRESSIONAL BLACK CAUCUS 
SWELLS ITS RANKS TO SOME 40 STRONG, OUR VOICE IS ONE THAT CANNOT 
BE IGNORED. 



73 



THIS FALL, I HAVE HAD THE HONOR TO CHAIR THE CBC NAFTA TASK 
FORCE AND TO CLOSELY STUDY THIS AGREEMENT'S IMPACT ON THE 
AFRICAN- AMERICAN COMMUNITY. THIS WAS NO EASY TASK, SINCE AS I 
MENTIONED PREVIOUSLY, AFRICAN-AMERICANS WERE REALLY NOT 
CONSIDERED IN THE NEGOTIATING OF NAFTA. COMPREHENSIVE AND 
EXPENSIVE STUDIES ABOUND ON NAFTA' S RAMIFICATIONS, FROM IMPACTS 
ON AIR QUALITY TO THE EFFECTS ON EXPORTS OF CERAMIC TILE. BUT 
LITTLE TO NO RESEARCH OR STUDY HAS BEEN DONE ON THE IMPACT OF 
NAFTA ON MINORITY COMMUNITIES. HOWEVER, AS I LOOKED DBEPER INTO 
THIS ISSUE, IT BECAME INCREASINGLY EVIDENT THAT THE CONCERNS OF 
THE MAJORITY OF AMERICANS WITH NAFTA ARE AMPLIFIED WHEN YOU 
CONSIDER AFRICAN AMERICAN PEOPLE. THOSE CONCERNS SHARBD BY 
ORGANIZED LABOR, ENVIRONMENTALISTS, AND CONSUMER ADVOCATES ARE 
ALL RELEVANT TO AFRICAN - AMERICANS , BUT IT IS THE ECONOMIC 
CONSEQUENCES OF NAFTA THAT ARE PARTICULARLY DEVASTATING TO 
AFRICAN -AMERICAN FAMILIES. 

A FAILED LEGACY 
THE 1992 ELECTION WAS A CLEAR REFERENDUM ON THE FAILED 
REAGAN- BUSH ECONOMIC "PROGRAM". OVER THOSE 12 YEARS, THE 
AMERICAN PEOPLE ENDURED SERIOUS ECONOMIC STAGNATION AND HARDSHIP. 
THIS NAFTA IS ANOTHER ARM, PERHAPS A TENTACLE, OF THOSE FAILED 
POLICIES, AN APPROACH I FIND IMPOSSIBLE TO SUPPORT. IN FACT, TO 
RUSH INTO AN AGREEMENT WHILE NOT FULLY UNDERSTANDING ITS ECONOMIC 
EFFECTS ON ALL OF OUR PEOPLE WOULD BE IRRESPONSIBLE, AND A 
BETRAYAL OF THE TRUST THAT MY CONSTITUENTS PLACED IN ME THROUGH 
MY ELECTION TO THE CONGRESS. I WOULD JUST LIKE TO POINT OUT THAT 
THE THREE PRESIDENTS MOST AGGRESSIVELY PROMOTING NAFTA, FORD, 
CARTER, AND BUSH, WERE VOTED OUT OF OFFICE IN PART BECAUSE OF 
QUESTIONABLE ECONOMIC POLICIES. 

THE REAL REASON FOR NAFTA 

I AM NOT AN ECONOMIST; HOWEVER, IT SEEMS TO ME THAT THE 
IDEA FOR A NAFTA HAS ITS ROOTS IN THE POLITICAL CIRCLES OF MEXICO 
CITY. IT IS MY UNDERSTANDING THAT THE NAFTA CONCEPT HAS BEEN 
BREWING SINCE THE MID- 1980 'S AS AN ATTEMPT TO ALLEVIATE THE 
MASSIVE DEBT CRISIS IN MEXICO. MEXICAN PRESIDENT SALINAS, THE 
MAN THAT SO MANY PEOPLE LABEL AS A GREAT REFORMER AND VISIONARY, 
OPENED MEXICO'S VERY CLOSED MARKETS TO CAPITAL INVESTMENT IN THE 
1980 'S IN AN EFFORT TO CURE HIS NATION'S ANEMIC ECONOMY, WHILE 
SIMULTANEOUSLY DEVALUING THE PESO. BUT BY 1986 OR SO, HE 
REALIZED THAT MEXICO NEEDED MORE FOREIGN CAPITAL IF THEY WERE TO 
EVOLVE INTO A MODERN ECONOMY. ENTER FREE TRADE, OR MORE 
APPROPRIATELY, THE CONCEPT OF ECONOMIC UNION, REGARDLESS OF 
WHETHER MEXICO'S ECONOMY WAS READY. 



NAFTA WAS REALLY DESIGNED AS AN INVESTMENT AGREEMENT TO LURE 
MORE AMERICAN CAPITAL INTO MEXICO. THAT IS WHY AMERICAN BUSINESS 
INTERESTS ARE PRACTICALLY SALIVATING AT THE DOORS THAT WILL OPEN 
TO NEW INVESTMENT. BUT WHY? U.S. FIRMS CAN INVEST IN MEXICO 
TODAY, AND IN FACT HAVE OPERATED IN MEXICO FOR MORE THAN 25 YBARS 
WITH A LARGE DEGREE OF SUCCESS. GENERAL MOTORS, FOR EXAMPLE, 



74 



WHICH HAS ITS HEADQUARTERS IN MY DISTRICT, IS MEXICO'S LARGEST 
SINGLE PRIVATE EMPLOYER. SO SINCB MANY COMPANIES ARE ALREADY 
THBRB, NAFTA HAS TO MAKE THE DEAL THEY HAVE NOW EVEN BETTER; AND 
IT DOES. 

NAFTA GIVES FAVORBD TREATMBNT TO FUTURE U.S. INVESTMENTS. 
THIS POINT IS OF CRITICAL IMPORTANCE. UP TO NOW, THE MAJOR U.S. 
INVESTORS IN MEXICO HAVE BEEN LARGE BUSINESSES. HOWEVER, WITH 
INVESTMENT IN MEXICO AS SAFE AS INVESTMENT IN THE U.S., SMALL AND 
MEDIUM-SIZED COMPANIES CAN NOW LOOK TO MBXICO AS WELL, NO LONGER 
FEARFUL OF LOST INVESTMENTS. 

JOB LOSS FOR AFRICAN-AMERICANS 

NAFTA PROPONENTS BELIEVE MEXICO TO BE (1) A GREAT EXPORT 
MARKET FOR U.S. GOODS AND SERVICES, AND (2) AN ESPECIALLY GREAT 
MARKET FOR AMERICAN CONSUMER GOODS. NAFTA PROPONENTS ARGUE THAT 
WE WILL OPEN UP A MARKBT OF 360 MILLION PEOPLE WITH A $6 TRILLION 
ECONOMY. CLOSER SCRUTINY SHOWS THAT MORE THAN $5.6 TRILLION OF 
THAT $6 TRILLION TOTAL IS FROM THE UNITED STATES. IN REALITY, 
MEXICO'S BUYING POWER IS ONLY AROUND 5* OF U.S. GROSS DOMESTIC 
PRODUCT (GDP) . WITH MEXICAN HOURLY COMPENSATION RANGING ANYWHERE 
FROM LESS THAN $1 TO $3 DOLLARS, WHICH IS A 30 PERCENT DECREASE 
SINCE 1980, AND AVERAGE YEARLY INCOMES BETWEEN $2,000 AND $3,000, 
THE 86 MILLION MEXICAN PEOPLE HAVE THE BUYING POWER EQUIVALENT TO 
THAT OF AFRICAN AMERICANS IN THE U.S. THE REALITY IS SIMPLE; THE 
MEXICAN MARKET FOR U.S. PRODUCTS IS A MERE SPECK IN TERMS OF 
PURCHASING POWER. TO TELL US OTHERWISE IS SHAMEFUL, AND I SUBMIT 
TO YOU THAT IF WE WERE REALLY TRYING TO RAISE THE STANDARD OF 
LIVING FOR AMERICANS, WE WOULD INVEST OUR ENERGIES IN OUR OWN 
PEOPLE RIGHT HERE. 

SO THE QUESTION IS WHY DO PROPONENTS SEE MEXICO AS A GREAT 
EXPORT MARKET? THE ANSWER: CAPITAL GOODS OR PLANT AND EQUIPMENT. 
TRADE WITH MEXICO TODAY IS PRIMARILY IN UNASSEMBLED PARTS BETWEEN 
VARIOUS DIVISIONS OF U.S. COMPANIES. LOWER UNIT LABOR COSTS, A 
PRODUCT OF WAGES AND PRODUCTIVITY, ALLOW U.S. COMPANIES TO EXPORT 
GOODS TO MEXICO THAT WILL BE TRANSFORMED AND RE-EXPORTED BACK TO 
THE U.S. AS FINISHED GOODS. SHIPMENTS TO THE U.S. FROM MEXICAN 
AFFILIATES OF U.S. COMPANIES HAVE GROWN EXPONENTIALLY, TO A POINT 
WHERE THBRE ARE SOME 2,200 U.S. AFFILIATES DOING BUSINESS IN 
MBXICO AND EMPLOYING HUNDREDS OF THOUSANDS OF MEXICANS, WHEN THEY 
COULD BB EMPLOYING HARD-WORKING AMERICANS. AND SO NAFTA WILL 
MAKE THIS FLOW OF CAPITAL GOODS ALREADY TAKING PLACE INTO A 
HEMORRHAGE AS THE TRADE BARRIERS FALL. THIS TRANSFER OF 
PRODUCTION EQUIPMENT OUT OF THIS COUNTRY AND INTO MEXICO WILL 
MOVE JOBS AND DISPLACE WORKERS, CREATING A DEVASTATING RIPPLE 
EFFECT THROUGHOUT THE AFRICAN- AMERICAN COMMUNITY. 



75 



THE LABOR MARKET 

IN TERMS OF EMPLOYMENT IN THIS COUNTRY, PASSAGE OF NAFTA 
WILL CREATE SOMETHING SIMILAR TO A THREE-FRONT WAR FOR AFRICAN- 
AMERICAN LABORERS TO FIGHT. FIRST, THEY ARE ALREADY CONFRONTING 
AN EVOLVING LABOR MARKET THAT FINDS THEM WORKING FOR LOWER 
WAGES. SECOND, THEY ARE LOSING JOBS AT MORE THAN TWICE THE 
NATIONAL AVERAGE AS A RESULT OF LABOR MARKET SHIFTS TOWARD A MORE 
WHITE-COLLAR LABOR FORCE. AND THIRD, BBCAUSE OF THE INEQUALITY 
IN OUR EDUCATIONAL SYSTEM, BECAUSE WE HAVE SO FEW JOB TRAINING 
PROGRAMS, ESPECIALLY JOB TRAINING PROGRAMS THAT EVEN CONSIDER 
AFRICAN-AMERICANS FOR HIGH-SKILLED TRAINING, UNPREPARBD TO MEET 
THE CHALLENGES THAT NEWER, HIGHER-SKILL JOBS PRESENT. 

PEROT'S GIANT SUCKING SOUND 

SINCE 1973, REAL WAGES HAVE DECLINED FOR ALL AMERICAN 
WORKERS AS THE U.S. ECONOMY MOVES TOWARD A MORE COLLEGE - EDUCATED , 
WHITE-COLLAR LABOR FORCE, LOSING ITS INDUSTRIAL PRODUCTION BASE. 
OVER 30 PERCENT OF THE BLACK LABOR FORCE IS EMPLOYED IN 
MANUFACTURING, COMPARED TO LESS THAN 20 PERCENT OF THE WHITE 
LABOR FORCE. BASIC MANUFACTURING HAS TRADITIONALLY BEEN THE 
ENTRY POINT INTO THE MIDDLE CLASS FOR MANY AFRICAN -AMERICANS . 
UNFORTUNATELY, THE FASTEST GROWING GAP IN INCOME BETWEEN BLACK 
AND WHITE EARNINGS HAS BEEN AMONG COLLEGE - EDUCATED , WHITE-COLLAR 
WORKERS. SINCE NAFTA WILL ENCOURAGE MORE MANUFACTURING TO MEXICO 
AND SEND INTO OUR STORES MORE MEXICAN PRODUCTS, WE WILL SEE 
SEVERE EROSION OF THOSE VERY JOBS HELD BY MANY AFRICAN-AMERICANS . 

LET ME NOW PULL ALL OF THESE POINTS TOGETHER. (1) PAST 
INVESTMENT IN MEXICO HAS NOT LED TO IMPROVEMENT IN THE LABOR 
MARKET FOR AFRICAN-AMERICANS . (2) MANUFACTURING PROVIDES A GOOD 
LIVING FOR MILLIONS OF AFRICAN - AMERICANS . (3) THE LABOR MARKET 
IS MOVING AWAY FROM MANUFACTURING EMPLOYMENT, EVEN WITHOUT NAFTA, 
CREATING ABOVE AVERAGE UNEMPLOYMENT IN AFRICAN-AMERICAN 
COMMUNITIES. (4) SOCIETY HAS NOT FULFILLED ITS OBLIGATIONS TO 
AFRICAN- AMERICAN PEOPLE, PARTICULARLY CHILDREN, AND HAS LEFT AN 
ENTIRE RACE ILL- PREPARED TO MEET THE CHANGES IN OUR LABOR MARKET. 
HOW DOES NAFTA FIT IN TO THIS PICTURE? INCREASED INVESTMENT BY 
U S. FIRMS ABROAD WILL CONTINUE THIS TREND AND DECREASE THE 
NUMBER OF JOBS TRADITIONALLY HELD BY NON- COLLEGE EDUCATED 
WORKERS, PLACING AFRICAN -AMERICANS AT A DISADVANTAGE AND 
DELIVERING DISPROPORTIONATE HARM. 

WORKER RETRAINING? 

IT IS CLEAR THAT MANY AFRICAN-AMERICANS ARE OVERLY 
CONCENTRATED IN THE JOBS NOW DISAPPEARING AND IN THOSE THAT WILL 
CONTINUE TO VANISH UNDER NAFTA. NAFTA SUPPORTERS LIKE TO SAY 
THAT NAFTA WILL RESULT IN NEW JOBS HERE, BUT WHAT ARE THESE 
JOBS? THEY ALL SEEM TO AGREE THAT THEY WILL BE THE NEW HIGH- 
WAGE, HIGH- SKILL JOBS OF THE '90'S. REALITY TELLS US OF TWO 
RESULTS- (1) INCREASED WAGE COMPETITION BETWEEN U.S. AND MEXICAN 
WORKERS, BOTH AT THE UNSKILLED AND SKILLED LEVBLS ACCOMPANIED BY 
CONSIDERABLE WAGE DEPRESSION; AND (2) THAT BLACK WORKERS ARE NOT 



76 



APPROPRIATELY TRAINED POR THESB JOBS. TO THBIR CRBDIT THE 
CLINTON ADMINISTRATION RECOGNIZES THE JOB POINT. THAT IS WHY 
THEY HAVE COME BEPORE THE CBC AND STRESSED THAT IN 1994 THEY WILL 
PROPOSE MAJOR JOB TRAINING PROGRAMS, INCLUDING CHANGES TO THB JOB 
TRAINING PARTNERSHIP ACT AND SCHOOL -TO -WORK INITIATIVES TO 
SUPPLEMENT THE CURRENT TRADB ADJUSTMENT ASSISTANCE PROGRAM FOR 
WORKBRS DISPLACED BY TRADB. IT WOULD SEEM TO ME THEN, THAT IF WE 
WERB REALLY SERIOUS ABOUT ADDRESSING CURRENT TRAINING DEFICITS 
AND THE FUTURE TRAINING NEEDS OF AMERICAN WORKERS, REAL JOB 
TRAINING PROPOSALS WOULD BE INCLUDED IN LEGISLATION IMPLEMENTING 
NAFTA BEFORB THE CONGRESS, PARTICULARLY WHEN IT IS NAFTA THAT IS 
BXACERBATING CURRENT PROBLEMS AND MAKING THESE PROGRAMS EVEN MORE 
NECESSARY. WHAT GOOD IS A NEW TRAINING PROGRAM THAT UNDER THE 
BEST SCENARIO, COULD BECOME EFFECTIVE IN MID- 1994 AND UP AND 
RUNNING IN MID- 1995, WHEN NAFTA COULD BECOME EFFECTIVE ON 
JANUARY 1, 1994? 

NOW, I ALSO HAVE SOME RESERVATIONS ABOUT THE CURRENT TRADE 
ADJUSTMENT ASSISTANCE PROGRAM, THE ADMINISTRATION'S SHORT TERM 
"REMEDY" FOR NAFTA- RELATBD JOB DISLOCATIONS. LAST YEAR THE GAO 
REPORTED THAT IN EXISTING WORKER RETRAINING PROGRAMS, WOMEN AND 
BLACKS ARE TRAINED FOR LOWER -SKILLED JOBS MORE SO THAN WHITE 
WORKERS. AT NO TIME HAVE I HEARD OF ANY PLAN FOR ENSURING 
AFFIRMATIVE ACTION IN THIS RETRAINING PROGRAM, ONE WHICH EVEN THE 
CURRENT LABOR DEPARTMENT'S SOLICITOR HAS FOUND INEFFECTIVE! 



THB TOLL ON CITIES 

NAFTA WILL BRING SEVERAL ADVERSE CONSEQUENCES FOR OUR CITIES 
AND URBAN CENTERS. MORE THAN HALF OF OUR LARGER CITIES HAVE HIGH 
CONCENTRATIONS OF MINORITY CITIZENS WHO ARE STILL VERY DEPENDENT 
ON MANUFACTURING FOR THEIR LIVELIHOOD. IN OVBR 40 PERCBNT OF THB 
METROPOLITAN AREAS NATIONWIDE, MANUFACTURING ACCOUNTS FOR 30 TO 
50 PERCENT OF EVERY WORKER'S INCOME. IN ADDITION, BLACKS AND 
WOMEN ARE HIGHLY CONCENTRATED IN PUBLIC SECTOR EMPLOYMENT. AS 
CITY RESIDENTS HAVE LESS DISPOSABLE INCOME TO SPEND IN 
NEIGHBORHOOD BUSINESSES, AND TAX REVENUES FROM LOCAL COMPANIES 
SHRINK, CITY GOVERNMENTS WILL HAVE LBSS MONEY FOR CITY PROGRAMS 
AND SERVICES, HENCE FBWER JOBS. LOST TAX RBVBNUE, COMBINED WITH 
HIGHER UNEMPLOYMENT CLAIMS, WILL COST FBDBRAL, STATB AND LOCAL 
GOVERNMENTS OVER $98 BILLION BY THE YBAR 2000. PROGRAMS 
IMPORTANT TO URBAN AND RURAL COMMUNITIES WILL COMPBTB FOR FEWER 
FBDBRAL DOLLARS, DBSPITE THE LIKELY RISE IN CLAIMS FOR FOOD 
STAMPS AND OTHER FORMS OF PUBLIC ASSISTANCE. PROGRAMS TARGBTING 
AT-RISK CHILDREN AND ECONOMICALLY DISTRESSED COMMUNITIES WILL 
LIKBLY GO UNFUNDED. THUS, OUR CITIBS, WHERE MANY MINORITIES ARE 
CONCENTRATED, WILL CONTINUE TO UNFAIRLY SUFFER. 



77 



BQOM. EMPLOYMENT OPPORTUNITIES 
NAFTA IS ALSO A MAJOR THREAT TO LONG -ESTABLISHED EQUAL 
EMPLOYMENT AND AFFIRMATIVE ACTION PROGRAMS, OFTEN THE ONLY WBAPON 
WE HAVE HAD AGAINST THE WAGE GAP BETWEEN WHITBS AND BLACKS. THE 
VOLUME OF FEDERAL CONTRACTS WITH U.S. COMPANIBS TODAY EXCEEDS 
$195 BILLION. FOR FEDERAL GOVERNMENT PROCUREMENT, NAFTA WOULD 
TREAT CANADIAN AND MEXICAN COMPANIES AS "U.S. COMPANIES," THUS 
EFFECTIVELY NEGATING "BUY AMERICA" POLICIES. CURRENTLY, FEDERAL 
CONTRACTORS MUST MAINTAIN AN EQUAL EMPLOYMENT OPPORTUNITIES 
PROGRAM. 96 PERCENT OF ALL CONTRACTORS HAVE REQUIRED AFFIRMATIVE 
ACTION PROGRAMS. THESE REQUIREMENTS HAVE SERVED AS IMPORTANT 
LEVERAGE ON THE PRIVATE SECTOR TO PROVIDE EQUAL EMPLOYMENT 
OPPORTUNITIES . 

SEVERAL STUDIES HAVE CONFIRMED THAT THESE EBO REQUIREMENTS 
ON FEDERAL CONTRACTORS HAVE INCREASED MINORITY EMPLOYMENT, 
CONTRIBUTED TO OCCUPATIONAL ADVANCEMENT, AND HAVE INCREASED 
MINORITIES' WAGES. OPENING UP FEDERAL CONTRACTS TO CANADIAN AND 
MEXICAN COMPANIBS WILL DILUTE THIS ACTION- FORCING REQUIREMENT. 
WITH FEWER AMERICAN COMPANIES GETTING FEDERAL CONTRACTS, THERE 
WILL BE FEWER EQUAL EMPLOYMENT OPPORTUNITY PROGRAMS IN THE 
PRIVATE SECTOR. 

TOWARD A BETTER TOMORROW 

MY CONSTITUENTS SENT ME TO WASHINGTON TO HELP CREATE JOBS, 
NOT DESTROY THEM. MY CONSTITUENTS SENT ME TO WASHINGTON TO 
CREATE HOPE, NOT EXTINGUISH IT. MY CONSTITUENTS SENT ME TO 
WASHINGTON TO REINVIGORATE THE ECONOMY, NOT TO DRAIN IT. 

NAFTA IS CALLED A TRADE AGREEMENT. IT CERTAINLY IS. IN MY 
VIEW, IT TRADES AWAY GOOD AMERICAN JOBS AT GOOD WAGES. IT TRADES 
AWAY THE ASPIRATIONS OF MANY HARD-WORKING AMERICANS, AND 
PARTICULARLY AFRICAN-AMERICANS, TO MAKE LIFE BETTER FOR 
THEMSELVES AND THEIR FAMILIES. AND IT GIVES BACK VERY LITTLB IN 
RETURN. 

I WOULD LIKE TO CONCLUDE MY REMARKS TONIGHT BY SHARING WITH 
MY COLLEAGUES A STATEMENT MADB LAST WEEK ON NATIONAL PUBLIC RADIO 
BY CIVIL RIGHTS LEADER ROGER WILKINS. IN JUST A FEW WORDS, HE 
CUT TO THE HEART OF THIS MATTER BY STATING: 

■WHEN PRESIDENTS START TALKING ABOUT THOSB RISING TIDES THAT 
LIFT ALL BOATS, BLACKS BETTER HIKE THEIR BRITCHES. 

AFTER THE CIVIL WAR WHEN SOMB BLACKS HAD THB NOT UNREALISTIC 
EXPECTATION THAT THEIR GOVERNMENT MIGHT COMPENSATE THEM WITH A 
LITTLE LAND FOR THB WORK AND THB PORTIONS OF THEIR LIVES THAT HAD 
BEEN STOLEN FROM THEM, THEY WERE DISAPPOINTED. INSTEAD, 
PRESIDBNT LINCOLN GAVE HUGB CHUNKS OF OUR NATIONAL PATRIMONY TO 
THB RAILROADS ON THB THEORY THAT THB ECONOMIC ACTIVITY THUS 
GENERATED WOULD BE GOOD FOR EVERYBODY. 



\ 



78 



BUT IT DIDN'T WORK OUT FOR BLACKS. AMERICAN EMPLOYERS 
OVERLOOKED NATIVE-BORN BLACK WORKERS AND BROUGHT UNSKILLED 
WORKBRS FROM EUROPE TO AMERICAN WORK SITES LEAVING BLACKS TO 
SUFFER ON AS SOUTHERN SHARECROPPERS 

IN THE LAST TWO DECADES, AMERICAN BUSINBSS HAS LOOKED 
OVERSEAS AND HAS PUT DOWN WORK SITES WHEREVER IT HAS FOUND CHEAP 
LABOR IT CAN USE. THAT AND OTHER BCONOMIC SHIFTS HAVE DEVASTATED 
THE UNSKILLBD PORTION OF THE BLACK ECONOMY. . . 

I CAN'T UNDERSTAND WHY THIS PRESIDENT HAS ADOPTED GEORGE 
BUSH'S TRICKLE DOWN NAFTA. I WOULD HAVE THOUGHT HE WOULD HAVE 
OFFERED UNSKILLED AMERICANS A SERIOUS JOBS PROGRAM BEFORE HE WENT 
OFF TRYING TO STRENGTHEN MEXICO. AFTER ALL, A STRONG LOS 
ANGELES, A STRONG NEW YORK, A STRONG DETROIT, A STRONG ATLANTA 
AND HEAVEN KNOWS, A STRONG WASHINGTON, D.C., SHOULD BE AT LEAST 
AS HIGH ON HIS PRIORITY LIST AS EVEN THE BEST INTENTIONED GOOD 
NEIGHBOR POLICY. " 

AMEN TO THAT ROGER. THANK YOU MR. CHAIRMAN. 



79 

Mr. Conyers. Barbara-Rose Collins, we commend you for the tre- 
mendous job you are doing with the members of the CBC and in 
the Congress on this very critical issue. 

No one needs to remind us what it means to the automobile in- 
dustry and people in the Midwest of our country. 

Ms. Collins. Absolutely. 

And, Mr. Chairman, if I can make one more final comment. I 
have traveled pretty much all over the world, and I have noticed 
that no one drives American cars except Americans. And when our 
auto companies locate south of the border, thereby putting my con- 
stituents and yours out of work, I wonder who they think will buy 
their cars. 

Mr. Conyers. OK. Fine. 

Ms. Collins. Thank you. 

Mr. Conyers. On that note, we will stand in recess until this 
vote has been dispensed with and we will resume again. 

Once again, Reverend Jackson, Ralph Nader, we are in your debt 
for — and we were talking about it up here, what may have been 
the most precise and explicit examination of this very complex trea- 
ty that has been put to the Congress. 

And we have, believe me — between Collin Peterson and myself, 
we have heard a lot of witnesses. We are in your debt. 

We will be in recess until our next panel comes forward. 

[Recess taken.] 

Mrs. Thurman [presiding]. I think we are going to go ahead and 
bring up the second group and get this started. 

I know you kind of looked over here to see who's talking. Because 
I know many of our members are going to try to — as soon as any 
of our votes are done over there, we are going to try to get out of 
here. So if we can move it along, we might be in a better position. 

Well, we got you in the right places. We just all have to leave 
to go vote again. 

[Recess taken.] 

Mr. Peterson [presiding]. The subcommittee will come back to 
order. I understand some members have questions that they want 
submitted. We will submit those questions and answers will be 
made a part of the record. 

Our second panel we apologize. I don't know who all is going to 
end up coming back. We just got done, so we will probably have 
to ask you to summarize as much as you can because I don't know 
how long we can keep anybody here. 

Your statements will be made a part of the record in their en- 
tirety. We have our second panel, Ms. Gloria Johnson, president of 
the Coalition of Labor Union Women, Ms. Thea Lee who has been 
to this committee before, I think probably at our hearing, a policy 
analyst and economist at the Economic Policy Institute, Dr. Paul 
Hinojosa-Ojeda, professor of economics at UCLA, visiting scholar at 
International American Development Bank, and Mr. Toby Malichi, 
president and managing director of Malichi Diversified, Ltd., of In- 
dianapolis. 

We welcome all of you to this hearing and look forward to the 
testimony. It is the custom of the Government Operations Commit- 
tee to swear in all of our witnesses, so if you don't mind, we just 
try to do that all the time. That way we are not prejudicing any- 



80 

body, so if you would stand and raise your right hands, we will 
swear you in. 

[Witnesses sworn.] 

Mr. Peterson. As I say, all your statements will be made a part 
of the record. I think Mr. Conyers is coming back and maybe Mr. 
Zeliff, and we will see how we do here. If you can boil it down, that 
would be a good thing. 

STATEMENT OF GLORIA JOHNSON, PRESIDENT, COALITION 

OF LABOR UNION WOMEN 

Ms. Johnson. All right. Thank you very, very much. My name 
is Gloria Johnson. As you have indicated, I am president of the Co- 
alition of Labor Union Women, an organization with about 20,000 
members representing the interests of 7.5 million union women. 

Its membership is drawn from more than 55 national and inter- 
national unions around the country, and we conduct our work 
through 60 chapters also across the United States, and I appreciate 
the opportunity to appear before you today to speak on behalf of 
the members of CLUW and the many others that we represent. 

I am also a member of the executive board of my union, the 
International Union of Electronics, and also a member of the execu- 
tive board of the AFL-CIO. I have just returned from CLUWs sev- 
enth biennial convention where the issue of NAFTA was the prior- 
ity issue, and it was addressed both by speakers and by convention 
resolution. 

A short time ago we took a very strong anti-NAFTA position, 
and, through resolutions, that position was reaffirmed from chap- 
ters across the country: From Minnesota, Indiana, Illinois, Califor- 
nia and others. 

I might also add that attending the convention were representa- 
tives from the Canadian Labour Congress who shared with us their 
experiences under the agreement between the United States and 
Canada. There has been a tremendous movement of jobs from Can- 
ada into the United States, and we are aware of the fact that the 
wage differential between the United States and Canada is cer- 
tainly a lot less than that between the United States and Mexico. 

I must apologize. I returned from our convention late yesterday 
to find out that I had been asked to appear here, and so my state- 
ment will be — my written statement will be submitted to tne com- 
mittee. I think if we look at the impact of this agreement on 
women and minorities, it is important, just for a moment, to look 
at some of the factors that I think play into our position, including: 
The 30 percent differential in pay between men and women work- 
ers here; the fact that 70 percent of all part-time workers are 
women; the majority of temporary workers are women; and despite 
laws on the books, women continue to be relegated to the low wage 
service jobs and, for the most part light manufacturing. 

Despite other laws, women and minorities as well are still among 
the last hired and the first fired. We make up 33 percent of all 
manufacturing jobs in the United States today; but here again we 
are concentrated in industries that are most vulnerable to job 
movement to Mexico. 

Mr. Chairman, I should tell you that I could give you one exam- 
ple after another of families that have been impacted by plant 



81 

movement up to this time; many of whom are still in the process 
of seeking jobs, but all of whom are fearful of the continuous move- 
ment of jobs from the United States to Mexico. 

Those industries that will be impacted the most have a high per- 
centage of women — the apparel manufacturing, 70 percent; elec- 
tronics and electrical machinery, about 42 percent; furniture manu- 
facturing, about 50 percent. 

I should mention that the latter two industries, electronics and 
furniture manufacturing, are industries represented by my union, 
and I could share with you firsthand some of the problems that we 
have had to address as plants have moved out of this country. 

I think data show very clearly that in manufacturing in particu- 
lar women of color will suffer disproportionate losses because they 
are the greatest number in many of these industries. As applies to 
the manufacturing sector, the same applies to the service sector; 62 
percent of womens jobs are threatened as restrictions against serv- 
ices originating abroad are removed. 

There will be, we believe — we think the data prove this, that 
there will be job loss and lower wages and poor working conditions 
if NAFTA goes into effect for what we see is that NAFTA pits Unit- 
ed States and Canadian workers against Mexican workers as cor- 
porations drive relentlessly to the lowest wage location. 

I might say, looking in retrospect just for a moment, that in the 
union that I belong, in 1972 there were 360,000 workers rep- 
resented by the IUE. Today that figure is 150,000. If you were to 
look at where that loss occurred, you would see the industries mov- 
ing not only south, but across the border. 

At one time radio was in our name; at one time we represented 
television manufacturing, and as you know, there are no American 
products, radios or TVs, or very few at this point. 

A preview of what is expected, we believe, is already seen in the 
Maquiladora factories along the Mexican border. AT&T, Westing- 
house, General Motors, GE and others, and while the figure has 
been questioned even as we sat here, there are 500,000 workers in 
the Maquiladora, 60 percent are women, most of them 14 to 20 
years old, making products for the U.S. market in substandard liv- 
ing conditions and where environmental and labor standards are 
not enforced. 

I think what has happened along the border ought to affect or 
be of concern to all of us. It certainly is to the women I represent. 
In 1970 there were 64 factories on the border. In 1980. 420. Today 
there are 1,750 U.S. corporations that have established on the bor- 
der factories that for the most part have taken away or reduced the 
work force in the United States, and increased the production 
there. 

We are very concerned that because of the great disparity in 
wages that there would be a continuation of the movement of jobs 
to Mexico; 7.4 million United States manufacturing jobs are at risk, 
and of these, 2.3 million are held by women, and yet what we are 
told, and I can't quite figure it out, is that Mexican workers will 
be able to buy our products. I don't know how this is expected to 
happen. It hasn't worked for them so far nor for us as well. 

There are several other concerns of working women, union 
women, certainly the whole question of toxic exposure and because 



82 

of the lateness of the hour, I won't give you the two examples, but 
I would include those in the testimony. 

The question is raised, well, who pays if this takes place. I think 
it is clear that it will be the taxpayer who will pay. It will be very 
difficult to address violations of environmental or labor standards 
because the problem-solving mechanism under NAFTA is inacces- 
sible and unaccountable to any kind of democratic control. 

If a company is found guilty, any fines will be paid by the coun- 
try responsible, not the company. In other words, it winds up that 
the taxpayers will pay and companies will have very little incentive 
to change their practices. Dislocated workers will pay. 

Contrary to claims made by NAFTA's corporate sponsors, work- 
ers who lose their jobs do not easily find new ones, especially if 
they are older or have a limited skill base. NAFTA does not provide 
a mechanism to train or cover dislocated workers who will suffer 
as a result of investments shifting to Mexico. 

NAFTA is no more than a corporate Bill of Rights, and it is al- 
lowing private corporations to do business without government 
intervention, and a real threat to America's economic stability and 
future growth. 

The issue, Mr. Chairman, to working women is an issue of jobs. 
We cannot lose sight of the fact that these are women, many of 
whom are single heads of households who have the full responsibil- 
ity of their families, handling everything involving their families 
from health care to food to shelter and to clothing. Many of them 
live at or below the poverty level, many are working wives whose 
salaries often make the difference between living in or above the 
poverty level. 

Many of them have experienced in their own families loss of jobs, 
many have had to resort to welfare or moving in with relatives. We 
are concerned. Yes, we may not have read NAFTA, but I am here 
to tell you that many of us have experienced what we believe, we 
truly believe, will be the outcome if this NAFTA is enacted. 

Thank you, very much. 

Mr. Peterson. Thank you very much. We appreciate you coming 
and being with us on such short notice. 

Ms. Johnson. Thank you. 

Mr. Peterson. I don't want to cut people too short. How much 
time do each of you need to make your — 5 minutes? 

Ms. Lee. I have a short statement. 

Mr. Peterson. So we are going to next hear from Thea Lee, and 
welcome back to the committee one more time. Again, we apologize 
for — I better reset this. 

Ms. Lee. That is all right. 

Mr. Peterson. I think the yellow light comes on when you have 
1 minute left. 

STATEMENT OF THEA M. LEE, ECONOMIST, ECONOMIC POLICY 

INSTITUTE 

Ms. Lee. Well, thank you very much for giving me the oppor- 
tunity to address you this afternoon, and thank you for devoting 
this nearing to the important question of how NAFTA is likely to 
affect women and minorities in the U.S. labor market. 



83 

NAFTA changes the overall economic landscape in the continent 
of North America, circumscribing the role of elected governments 
in some areas, such as labor and environmental standards, govern- 
ment procurement, and regulation of foreign investment and broad- 
ly extending the role of government in other areas, such as the pro- 
tection of intellectual property rights. 

In this way it will affect all the citizens of the three North Amer- 
ican countries. But NAFTA will also cause dislocations in specific 
industries and put downward pressure on wages for some types of 
workers. While many economists believe that NAFTA will yield 
economic gains for the United States, most admit that these gains 
are likely to be very small, given the size of the Mexican economy 
and the openness of the United States economy. 

Professor James Tobin, 1981 nobel laureate, stated in a public 
forum at Yale University last week that these gains are unlikely 
to be large enough to be measurable in a statistically significant 
sense. If the models used to predict gains from NAFTA incor- 
porated more realistic assumptions, such as chronic unemployment 
and international capital mobility, it is possible that these small 
net gains would evaporate entirely. 

But small net gains or net losses can mask large gross losses and 
gains for different members of society. Our analysis of the jobs that 
are likely to be vulnerable under NAFTA shows that overall Afri- 
can American, Hispanic, and Asian Americans hold a dispropor- 
tionate share of the production jobs likely to be displaced by 
NAFTA. 

Furthermore, displacement tends to take a heavier toll on minor- 
ity workers than on white workers. Up to 5 years after being dis- 
placed, African American and Hispanic workers are more likely to 
be unemployed than white workers, and this tendency is even more 
marked during a recession. 

The Congressional Budget Office has also reported that displaced 
nonwhite workers tend to be out of work for 4 weeks longer than 
comparable white workers on average, for an average of 24 weeks. 
While in general NAFTA displaced workers are more likely to be 
male than female, women are disproportionately concentrated, as 
Gloria Johnson so eloquently described, in some industries such as 
apparel and some sectors of electronics and food processing that 
are likely to experience severe job losses as a result of NAFTA. 

Seventy-eight percent of apparel workers are women, and these 
jobs are concentrated in rural areas and in large cities, such as 
New York and Los Angeles. The women who work in rural areas 
tend to be less geographically mobile than other workers, and they 
drop out of the labor force after displacement at more than twice 
the rate of other displaced workers. 

In cities apparel workers are likely to be recent immigrants who 
may also have limited job opportunities if they lose their original 
job. The Congressional Budget Office found that women workers 
who are displaced tend to experience longer spells of joblessness 
than male workers by 3V2 weeks, and to take deeper pay cuts when 
they do finally find a new job. 

Because of its uneven impact on the most vulnerable members 
of the work force, NAFTA is likely to contribute to the growing in- 
equality and the distribution of income that we have experienced 



84 

during the last two decades. This consequence of NAFTA deserves 
as much attention as its impact on the aggregate economy. 

Thank you. 

Mr. Peterson. Thank you. Either the timer doesn't work or you 
were very efficient. 

Ms. Lee. Very uncharacteristically brief. 

Mr. Peterson. We appreciate that. We appreciate you coming 
before our committee one more time. Your testimony will be made 
a part of the record. Thank you very much. 

Ms. Lee. Thank you. 

[The prepared statement of Ms. Lee follows:] 



85 



Economic Policy Institute 

1730 RHODE ISLAND AVENUE, NW • SUITE 200 • WASHINGTON, DC 20036 • 202/775-8810 • FAX 202/775-0819 



THE LIKELY IMPACT OF NAFTA 
ON WOMEN AND MINORITIES 



Testimony 

before the 
EMPLOYMENT, HOUSING AND AVIATION SUBCOMMITTEE 

of the 

U.S. HOUSE OF REPRESENTATIVES 

COMMITTEE ON GOVERNMENT OPERATIONS 



November 10, 1993 

by 

Thea M. Lee 
Economist 

Economic Policy Institute 

1730 Rhode Island Avenue, NW, Suite 200 

Washington, DC 20036 

(202) 775-8810 



86 



Mr. Chairman, members of the committee, thank you for giving me the 
opportunity to address you this afternoon, and thank you for devoting this hearing 
to the important question of how NAFTA is likely to affect women and minorities 
in the U.S. labor market. 

NAFTA changes the overall economic landscape in the continent of North 
America, circumscribing the role of elected governments in some areas such as 
labor and environmental standards, government procurement, and regulation of 
foreign investment, and broadly extending the role of the government in other 
areas, such as the protection of intellectual property rights. In this way, it will 
affect all the citizens of the three North American countries. 

But NAFTA will also cause dislocations in specific industries and put 
downward pressure on wages for some types of workers. While many economists 
believe that NAFTA will yield net economic gains for the United States, most 
admit that these gains are likely to be very small, given the size of the Mexican 
economy and the openness of the U.S. economy. 

Professor James Tobin, 1981 Nobel Laureate, stated in a public forum at 
Yale University last week that these gains were unlikely to be large enough to 
measure in a statistically significant sense. And if the models used to predict 
these gains incorporated more realistic assumptions, such as chronic unemploy- 
ment and international capital mobility, it is possible that these small net gains 
would evaporate. 

But small net gains or losses can mask large gross losses and gains for 
different members of society. Our analysis shows that overall, African American, 
Hispanic, and Asian Americans hold a disproportionate share of the production 
jobs likely to be displaced by NAFTA. 1 Furthermore, displacement tends to take a 
heavier toll on minority workers than on white workers. Up to five years after 
displacement, African American and Hispanic workers are more likely to be 



1 See Thea Lee, "Jobs Vulnerable to Relocation Due to NAFTA: 
A State by State Breakdown," October 23, 1992 for a description 
of the industries we identified as vulnerable under NAFTA. 



87 



unemployed than white workers. This tendency is even more marked during a 
recession. 2 The Congressional Budget Office has also reported that displaced non- 
white workers tend to be out of work for four weeks longer than comparable white 
workers on average. 3 

While in general, NAFTA-displaced workers are more likely to be male than 
female, women are disproportionately concentrated in some industries such as 
apparel and some sectors of the electronics and food processing industries that are 
likely to experience severe job losses as a result of NAFTA. 

Seventy-eight percent of apparel workers are women. These jobs are 
concentrated in rural areas and in large cities, such as New York and Los Angeles. 
Women working in rural areas tend to be less geographically mobile than other 
workers and drop out of the labor force after displacement at more than twice the 
rate of other displaced workers. Apparel workers in cities are likely to be recent 
immigrants, who may also have limited job opportunities after displacement. The 
CBO found that women workers who are displaced tend to experience longer spells 
of joblessness than male workers (by 3.4 weeks) and to take deeper pay cuts when 
they are reemployed. 4 

Because of its uneven impact on the most vulnerable members of the work 
force, NAFTA is likely to contribute to the growing inequality in the distribution 
of income that we have experienced during the last two decades. This consequence 
of NAFTA deserves as much attention as its impact on the aggregate economy. 



2 U.S. Dept. of Labor, Bureau of Labor Statistics, News USDL 
90-364, "Worker Displacement Continues to Decline," July 17, 
1990; and U.S. Dept. of Labor, Bureau of Labor Statistics, News 
USDL 92-530, "Worker Displacement Increased Sharply in Recent 
Recession," August 19, 1992. 

3 Congressional Budget Office, Displaced Workers: Trends in 
the 1980s and Implications for the Future , February 1993, Table 
6, p. 20. 

4 CBO, February 1993, Tables 6 and 7, pages 20 and 21. 



88 

Mr. Peterson. Now, Dr. Hinojosa. 

STATEMENT OF RAUL A. HINOJOSA-OJEDA, Ph.D., ASSISTANT 
PROFESSOR OF PLANNING, UNIVERSITY OF CALIFORNIA 

Dr. Hinojosa-Ojeda. Thank you very much, Mr. Chairman. 

Although I won't use the usual formula which is about 1 minute 
for every hour of time I put into this application because it would 
take us about half an hour, frankly, since the last 24 hours, but 
I took very much seriously the request from your committee to do 
the work that really needs to be done to cast some facts on the 
table. 

I do this because, frankly, this is not a passing fancy for me. I 
was born in Mexico, I grew up in the United States on the south 
side of Chicago in a racially mixed neighborhood. I have been po- 
litically active and as a scholar and as a policy activist working on 
United States-Mexico issues for 15 years, way before this became 
the attention-grabbing thing that it is now. 

I organized the first international conference for the defense of 
workers in Mexico in 1980 where we invited, by the way, the AFL- 
CIO who unfortunately chose not to appear at that time. We have 
been involved over the last 3 years in doing research which is used 
by all sides on the debate. 

The AFL-CIO, in fact, today in their TV commercials has a sign 
that says 500,000 jobs lost. Maybe you have seen it, Mr. Chairman. 
That comes from one of my studies. The reality of that number, 
however, is very interesting, that that number really represents a 
movement of people back to Mexico, which are being — is counted as 
a "job loss" in the United States. 

Just to give you a sense of how unfortunately this debate has 
gotten completely out of hand from reality and from what I think 
are the real issues of working people on both sides of the border 
which have to be addressed and aren't really being addressed by 
the way the debate has unfolded. That started during the Bush 
years. 

Frankly, I was an opponent of the Bush NAFTA. I led some of 
the most important research in identifying some of the major prob- 
lems, particularly agricultural workers in Mexico, for example what 
could happen there, what would we need to do policywise to think 
about that, not just as something to bash over the head with, but 
really to do something about. 

The same thing with respect to immigrant and Latino and black 
workers. My studies have been the only ones for years, and I am 
going to leave with you a number of the studies that I have done 
not only nationally but regionally that actually have been asking 
the question about minority workers in the United States as well 
as vulnerable workers on the Mexican side from the very begin- 
ning. 

I want to tell you that a story basically of where I have now 
come, having done this research, looking at, if you will, the good, 
the bad, and the possible, all of it, you know, at once because I care 
about this and I will be around this debate after everybody votes 
on it next Wednesday, that is the front lines of my work, both po- 
litically as well as scholarly to improve the condition of my people, 
Americans and Mexicans on both sides of the border, and what I 






89 

have done with that research is also create a basis for doing policy 
alternatives, and we did a whole set of policy alternatives toward 
the Bush NAFTA, and we organized over the last 2Vz years the 
largest coalition of Latino organizations, people that have lived the 
reality from both sides of the border to look at a set of alternative 
policy proposals that had to have been incorporated inside of the 
NAFTA. 

The most important one you may have heard about it, the North 
American Development Bank whicn in fact Jesse Jackson sat here 
today and spoke about it as his vision of what a people's NAFTA 
is all about. He got that from us. We have been fighting for it, and 
now, as you know, it is part of the new vision of what NAFTA is, 
which I think is indeed fundamentally different under President 
Clinton. 

Let me first go very quickly through the research findings that 
I have had, specifically on the issue of minority workers, African- 
Americans and Latinos, and then talk to you about why this type 
of research led to the type of policies that we have been diligently 
working on in detail, not just some pie in the sky about not this 
NAFTA, something else in the future maybe, like in concrete what 
are we talking about in the reality of United States-Mexico, what 
institutions could be put in place to really take care of the workers 
in the dimensions of the problem that we are now identifying in 
the NAFTA. 

Let me just very quickly lay it out for you. I have done, by the 
way, almost every single type of methodology you could apply and 
use here, all the way from very fancy modeling to time series his- 
torical work to as an anthropologist going out and interviewing 
street vendors in Los Angeles, garment workers and as well as ag- 
riculture workers in Mexico, this has been very comprehensive and 
like I say a lot of people have been involved in this. 

The reality of it is that the increase of trade that we have seen 
and that continues to occur between Mexico and the United States 
as Mexico liberalizes and as United States exports increase benefits 
on gross and net terms an incredible amount of not only United 
States workers in general, but it turns out Latinos and blacks. 

I was actually quite surprised to find, and all the data is here 
by the way, every single SIC code, the trade growth in every single 
of these SIC codes, the composition of the population by each of the 
ethnic groups in the issue of these SIC codes, to not just say, OK, 
lots of jobs being created, but what type of jobs and who benefits. 

A couple of very interesting points. Union workers, unions, I am 
wearing an AFL-CIO pro union button and a pro-NAFTA button 
because the fact of the matter is NAFTA creates and United 
States-Mexico integration creates union jobs. 

Seventy percent of the trade surplus between Mexico and the 
United States which everybody has told you is growing dramati- 
cally is in sectors where unionization rates are more than the aver- 
age of unionization, over 20 percent unionization rates, that is who 
gets 70 percent of the jobs is these highly unionized sectors. 

A small part of the import penetration, I mean most of the im- 
port penetration, a small part of the net trade growth occurs in low 
unionized sectors, in other words, it is the better paid workers, the 
more highly organized workers. 



90 

Frankly, if we had adequate representation of minorities, Afri- 
can-Americans and Latinos in unions, the numbers that I will 
present to you would be a lot better, but guess what, they are not 
actually what you would expect from the conventional wisdom that 
the disproportionate fall is indeed overly on Latinos and African- 
Americans. 

In fact, what vou find is that in aggregate terms, and you can 
move to the final tables 7 and 8 show you the gross amount of jobs, 
and again we are not talking a lot about a huge number of jobs 
here, which is frankly why I have said over and over again that 
this entire debate is completely misguided in terms of blaming 
Mexico for any possible serious implications it could have one way 
or another on trade. 

We are literally talking about less than about 60,000 jobs being 
created. That is good, 60,000 jobs being created for Latinos, 80,000 
jobs being created for African-Americans, that is good, that is relat- 
ed to exports to Mexico. That is how many new Latino jobs you are 
creating. 

Now, again, that is not going to solve all of our problems, but the 
point is it is a relatively small number, but it is positive as a result 
of trade with Mexico, all right? OK All right. 

If we look at the breakdowns, the next page, it shows — what it 
shows you interestingly enough is that the average white workers 
in this country get most of those jobs because they are the majority 
of the work force. Proportionally, though, what we find is that in- 
terestingly enough it is not that much different from their propor- 
tion to tne overall participation in the work force, Latinos and 
blacks, except interestingly enough for Latinos. 

Latinos are in comparison, if you will, Latinos, blacks and whites 
are the ones that gain the most in proportion to how they partici- 
pate in the economy. What is interesting about that is that most 
of the job displacement occurs in sectors where there are more re- 
cent immigrants, OK? Very interesting. 

The import penetration into the United States is primarily in 
sectors which more and more relies on recent immigrants. African 
Americans do much better than Latinos, OK, in terms of how much 
they share in the job gains versus how much they share in the po- 
tential job losses, and white Americans basically it doesn't really 
affect their share of the population. 

The point here is simply that I have used the most extreme pos- 
sible assumptions as to now many jobs could be lost here. I am 
talking about every — if we count every single import from Mexico 
to the United States, right, as having resulted from a plant closing 
in the United States being moved just like it was described here 
today that they put the little tools in the box and take it down to 
Mexico, even if you take that extreme assumption, which we know 
that is a basically irrelevant part of the exports from Mexico to the 
United States occur through that type of capital flight, the vast 
majority of it does not compete with United States workers in the 
type of imports, but let's assume every single import from Mexico 
to the United States displaces a United States worker, OK? Let's 
just take that. 

It is still net positive gains strongly for the economy as a whole 
and for Latinos and for African-Americans as well as for white 



91 

workers, OK? There is no way you can get around that. The point 
here, though, is that we have an experience of what happens when 
there isn't that type of growth ana that type of liberalization in 
Mexico, and it is the nature of the early 1980's, the slowdown in 
Mexican growth which not one study will tell you that Mexico is 
going to grow more if NAFTA goes down, I will tell you that, no- 
body says that. That translates directly into United States job 
losses and net job losses for white workers, African-Americans, and 
Latino workers, and so in a sense I think it is extremely clear, we 
have an opportunity now with the Clinton administration actually 
having created even much better than in the European Community 
in many respects, and which is a ground breaking set of agree- 
ments for other trade treaties, but particularly for the North Amer- 
ican and United States-Mexico relation or we can basically take the 
Nancy Reagan approach and just say no, and we kill jobs. 

Thank you. 

Mr. Peterson. Thank you. We appreciate your being with us. 

Dr. Hinojosa-Ojeda. Sorry about the time. 

[The prepared statement of Dr. Hinojosa-Ojeda follows:] 






92 



The Impact of U.S.-Mexico Trade on Latinos and African 

Americans 

TESTIMONY PRESENTED 

BEFORE THE 

SUBCOMMITTEE OM EMPLOYMENT, HOUSING, AMD AVIATION, OF THE 

COMMITTEE OM THE GOVERNMENTAL OPERATIONS, 

0.8. HOUSE OF REPRESENTATIVES 

by 

Raul A. Hinojosa-Ojada, Ph.D. 

Assistant Profaaaor of Planning 

university of California, Los Angelas 

and 

Viaiting Scholar 

Intar-Aaerican Davalopaant Bank 

November 10 , 1993 

Mr. Chairperson, I welcome this opportunity to explain to 
your committee the evolution of my research and policy 
recommendations with respect to the link between U.S.-Mexico 
integration and the economic status of Latinos and African 
Americans. This is an issue which as a scholar and a policy 
activist I have devoted many years, starting way before all the 
attention grabbing debate over NAFTA. I have, in fact, been 
publishing on these issues for over ten years and as early as 1980, 
I was involved in organizing the first International Conference on 
Worker Rights between Mexico and the U.S. As someone born in 
Mexico and raised in the U.S., I have always sought to make sense 
of the economic inequality between Mexico and the United States, 
income inequalities within each countries, and, specifically, 
racial inequality within the U.S. Growing up in racially 
integrated South Chicago, in a union household (my mother was a 
member of ACTWU) , and eventually serving as a research director for 
the first Harold Washington election campaign and transition team - 
- the original Rainbow Coalition — I have always been committed to 
Latino-Black-Labor unity as the bedrock of progressive change in 
this country. I furthermore believe that it is the responsibility 
of this movement to seek out a progressive and responsible 
political-economic relations between the U.S. and the developing 
world, be in with South Africa, Central America, Haiti or Mexico. 

I want to relate to you how I was an early and vocal critic 
regarding the need to explicitly consider the potential negative 
impacts of NAFTA on the poorest members of North America, 
particularly Latinos and Blacks on the U.S. and potential migrants 
in the agricultural regions of Mexico. In the research I have 
conducted with my colleges at the University of California I have 

1 






93 



sought to look at the good, the bad and the possible. I have 
applied a wide range of different methodologies, fron the most 
sophisticated CGE models, to historical time-series, macro models 
with unemployment, to in-depth sectoral analysis from high tech and 
autos to direct interviews and surveys of street vendors in L.A. I 
was the first researcher to draw attention three years ago to the 
particular issues of agricultural workers in Mexico. I have 
conducted this research not only on a national level, but specific 
studies in California, Texas, Illinois and New York. I brought 
these studies for your committee as part of my testimony to be 
entered in the record. 

Let me say to the committee that after the most exhaustive set 
of investigations that I know of conducted on the issue, the 
following simple conclusions are absolutely clear: 

-As Mexico liberalizes its trade barriers and grows, this is 
a tremendous benefit for U.S. net exports, especially net 
manufacturing exports. 

-This translates directly into thousands of more unionized and 
higher paying jobs. This good job growth is much higher and 
growing more rapidly than the any potential job displacement due to 
imports or capital flight, even under very extreme and unrealistic 
assumptions and scenarios. 

-Blacks and Latinos have seen their total number of jobs 
created through exports to Mexico rise dramatically in the last 
decade, particularly in the last 5 years as Mexico has liberalized 
and grown. Blacks and Latinos have also seen rapid expansion in 
the total number of net jobs created, even calculated under the 
extreme assumption that every import from Mexico is a result of a 
plant closing in the U.S. and opening up in Mexico for re-export to 
the U.S. — the totally exaggerated "loud sucking sound" metaphor. 

-While Latinos and Blacks do very well in terms of both gross 
and net job creation, white workers better (Table 8; Figure 3). 
Latinos and Backs participate slightly less in the job gains and 
are slightly more likely to work in sectors that may be at risk 
from import competition. 

-Interestingly enough, however, Blacks do much better than 
Latinos and are more similar to the strong positive white gains. 
Latinos, however, share disproportionately more in the potential 
job risks than do Blacks or white, confirming the well know fact 
that import competing sectors are usually the more immigrant 
intensive. 

-Voting down NAFTA will destroy Black and Latino jobs in both 
total and net terms. When Mexico does not grow, or has to resort 
to reducing its imports and increasing its exports, U.S. exports 



94 



and thus U.S. employment declines, in both gross and net terns. 
NAFTA has a much bigger impact on Mexico than the U.S. Mexico 
grows ouch more with NAFTA, reducing the pressures for out 
migration. Without NAFTA, Mexico grows much less, translating into 
less U.S. exports and slightly less U.S. jobs, but out-migration 
pressures increase, especially with the threat of a devaluation. 

In our research we have sought to place in the forefront the 
issue of who looses as well as who gains and to go beyond that to 
investigate what is the best set of policy alternatives. Along 
with the Latino Consensus — the largest coalition of Latino 
organization ever assembled to debate and develop a national 
political position — I labored to propose a series of detailed 
policy alternatives to the Bush NAFTA options as to what had to be 
specifically done to address these inequality and adjustment issues 
head on. Specifically we proposed the creation of a North American 
Development Bank as the most effect way of beginning the process of 
addressing the root causes of regional inequalities. The NAOBANK 
would serve as a regional lending institution designed to finance, 
coordinate, and implement border and non-border environmental, 
infrastructure, and community development projects related to 
continuing North American integration. NADBANK would be organized 
to invest specifically in the environmental, physical, and social 
infrastructure that will be needed to bring about an upward 
convergence in environmental and social standards and practices 
between Mexico and the United States. 

I now come before this committee to report that I am a 
convinced that NAFTA plus the recent side agreements and related 
policy proposals must be supported as the best chance we have had 
in decades, if not the history of U.S. -Mexico relations, to begin 
dealing with the root causes of regional inequality and 
establishing the institutional basis for advancing the agenda of 
economic development and worker rights, which I insist has been and 
will continue to be my principle agenda issue long after this NAFTA 
debate . 

Failure to support NAFTA at this time will not only squander 
this historical opportunity, but will increase the economic 
hardship of exactly the people that we as a compassionate and 
forward looking society need most desperately to care about. 

Evolution of U.S. -Mexico Trade 

U.S. trade with Mexico has traditionally represented a highly 
positive source of economic growth and employment. As Mexico 
lowered its trade barriers and grew economically from 1987 to 1992, 
the U.S. gross exports gained dramatically and net exports grew 
even more rapidly. Figure 1 shows how U.S. exports to Mexico have 
grown much more than U.S. imports from Mexico. As tables 1-3 



95 



indicate, gross exports rose from $18.8 billion in 1983 to nearly 
$40 billion in 1992. Net exports rose from a deficit of nearly $6 
billion to surplus of over $5 billion during the same period. 
Manufacturing exports account for the vast majority of this trade, 
with gross manufacturing exports rising by over 300%, from $12.8 
billion in 1987 to $37 billion in 1992. Net manufacturing exports 
grew from a $.5 billion deficit to an astonishing $10.9 billion 
surplus during the same period (Figure 2) . 

Since virtually all studies on NAFTA predict that it will 
increase Mexico's growth rate, U.S. exports should accelerate even 
faster. This is because NAFTA will bring down Mexico's higher 
trade barriers against U.S. exports much more (250%) than NAFTA 
will reduce the already low U.S. barriers to Mexican exports. 
Rejection of NAFTA, however, is unanimously seen as resulting in a 
reduction of Mexico's growth potential while allowing Mexico to 
keep its higher trade barriers, thus resulting in a reduction of 
U.S. exports to Mexico. The poorer performance of the Mexican 
economy in the early 1980s, and the associated deterioration in 
U.S. net exports, is the type of impact we can expect with the 
defeat of NAFTA, if not the magnitude. 

U.S. Jobs and Trade with Mexico 

These U.S. trade statistics with Mexico translate into very 
rapid gross job growth and even faster net job grow growth for the 
U.S. Since every billion dollars of U.S. exports to Mexico 
produces about 19,500 jobs, total U.S. jobs supported by exports to 
Mexico rose from about 191,000 to close to over 800,000 jobs 
(Figure 3; Table 4). 

The Latino Consensus research project of NAFTA which I 
directed was very interested in examining potential job losses, as 
well as the job gains. For this purpose we developed a measure of 
"Net Job Growth" defined as jobs created through exports versus 
jobs placed at risk from imports or capital flight. It is 
important to point out that in this definition we take the very 
extreme assumption that every import from Mexico can place Illinois 
jobs at potential risk due to import competition or capital flight. 
The fact is that most imports from Mexico do not compete directly 
with U.S. production and are not produced as a result of capital 
flight to Mexico. But even if this were the case, the important 
point is that the U.S. would still come out a big winner in job 
creation. Our net results should thus be seen as representing the 
most conservative estimate of how much U.S. wins in net positive 
job growth. Using this estimate, net job growth in the last five 
years rose from -166,000 jobs to positive net of 82,000, a swing of 
a quarter of a million in net job growth using the most 
conservative estimate (Figure 4; Table 6). 

In addition to positive gross and net job growth, we found 



% 



that b«tter type* of jobs are created by trad* with Mexico. U.S. 
job gaina are highly concentrated in sectors that are better paying 
with higher than average unionization ratea. Figure 5a shows that 
about two thirds of the net exports from the U.S. to Mexico are 
produced in sectors with higher than average unionization ratea. 
Imports and potential job displacement occurs in lower paying 
sectors with lower and or mich lower than average unionization 
ratea (Figure 5b-c) . As we will see below, the slightly less 
favorable iapact on minorities compared to whites of trade with 
Mexico would be eliminated if more minorities had access to the 
better union jobs. 

Latinos and African America ns in U.S. -Mexico Trade 

Despite these very positive net job gains results, the NAFTA 
research project of the Latino Consensus was particularly 
interested in issues of equity and the potential impact of NAFTA on 
Latinos and African Americans in particular. It was the core 
concern of the Latino Consensus that issues related to low wage 
workers be directly address, be they in California, Texas, 
Illinois, or New York. 

Research on the impact of trade between Mexico and the U.S. on 
Latino African American workers yields surprisingly positive 
results. These results, by the way are best in the "rust best" 
manufacturing state of Illinois, which are even better than the 
positive results we have found in California and Texas. Table 7-8 
presents the data for While, Latino and Black employment growth 
related to U.S. trade with Mexico. As can be seen, all workers do 
very well in gross employment terms as the U.S. increases its trade 
with Mexico. Total Latino employment based on exports to Mexico 
expanded from about 21,000 to around 79,000 jobs, growing at a rate 
of nearly 300% from 1987 to 1992. Net job growth for Latinos was 
strongly positive, growing by 18,000 in the last five years. 
Latinos in "rust belt" Illinois do much better with employment 
growing from about 500 to around 2,500 jobs, growing at a rate of 
over 100% per year from 1987 to 1992. Surprising, the proportion 
of gross jobs held by Latinos on a national level compared to 
Whites and Blacks grows by slightly more than their proportion of 
the workforce, having seen this proportion fall in the early 1980s 
as U.S. exports to Mexico fell. Latinos, however, share 
disproportionally more in the potential job risks than do Blacks or 
white, confirming the well know fact that import competing sectors 
are usually the more immigrant intensive. 

Black workers do even better with expanding trade with Mexico. 
Total employment related to Mexico rose from 27,000 to 79,000 while 
their share of jobs related to Mexico exports increased from 9.7% 
to 10.2% Net job grow is even stronger, increasing by 24,000, 
representing a even faster growing proportional share of net job 



97 



grow compared to Latinos. 

This Mexico related Black and Latino job growth, like other 
trade based job growth, occurs in sectors which are more likely to 
be unionized and have higher wages. In Illinois, net Latino and 
Black employment growth is even faster than gross employment 
growth, reflecting the overall Illinois significant net export 
potential with Mexico. 

While Latinos and Blacks do very well in terms of both gross 
and net job creation, white workers better (Table 8; Figure 3). 
Latinos and Backs participate slightly less in the job gains and 
are slightly more likely to work in sectors that may be at risk 
from import competition. This finding is consistent with our 
findings in California, Illinois, and Texas. In all these states, 
while we found net positive Latino and Black job growth related to 
trade with Mexico, Latinos tended to be slightly over-represented 
in the potential risks and slightly under-represented in the gains 
of trade with Mexico. While this is also true for Blacks, Blacks 
to much better than Latinos with their share of participation in 
job gains and losses are virtually equal. 

Surprisingly, however, Latinos in Illinois do better than 
Latinos in California and Texas. This is primarily due to the fact 
that Illinois is a much stronger net exporter to Mexico. With less 
sectors at risk through trade with Mexico, fewer Latinos are at 
risk since they like other immigrants and minorities tend to work 
more in import competing sectors. 

Conclusion 

The findings of this research on Illinois reinforces the 
previous research of the Latino Consensus and strengthens to a 
greater degree its policy recommendations. While increased trade 
with Mexico is clearly a net positive proposition for Latinos, 
Latinos have just cause to demand that particular attention be 
given to their needs in the areas of job retraining and community 
economic development. 



98 



FIGURE 1: U.S. TRADE WITH MEXICO 

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109 



TUESDAY. SEPTEMBER 14, 19S3 A13 



Losing Ground 

In Latest Recession, 
Only Blacks Suffered 
Net Employment Loss 

Firms Added Whites, Asians 
And Hispanics Overall, 
But They Deny Any Bias 

Effects of Seniority, Location 



By Rocheue Sharps 

So// Rrporlrt o/ Thf. Wall S™r*rr Journal 

The last recession seriously eroded 
equal opportunity for America's black 
workers. 

Blacks were the only racial group to 
suTIer a net job loss during the 1990-51 
economic downturn, at the companies re- 
porting to the Equal Employment Opportu- 
nity Commission. Whites. Hispanics and 
Asians, meanwhile, gained thousands ol 
jobs, according to a Wall Street Journal 
analysis of EEOC records. 

The computer aided study shows that 
some of the nation's largest corporations 
shed black employees at the most dispro- 
portionate rate. At Dial Corp.. for instance. 
blacks tost a.F, of the jobs cut, eves 
though they represented 26.3% of Dial's 



Unequal Opportunity 

Reltlrt rtartt . titles tot irtidn 
M *ao« A1I-A1S Itttrlbt: 

m Computes when blacks' shut of Jot 
losses most exceeded their share of the 
overall *ori force. 

■ The tmpacl of Job cuts h Nadu at uxB- 
rldaal companies *1tt tsptoyneat losses. 

■ srkr Macks at some coapaafes mant- 
tained (heir stare of Jobs despite large 
esrporale-arlde arbacks. 

■ Bow major radii aad eOuuc grams 
fired m various job categories dartag the 
IWC-SI .errsslow 



wort force going into the recession. At 
VY.R. Grace & Co.. they held 32.2% of the 
jobs cut, while they accounted for 13.1% of 
the company's pre-recession payroll. At 
BankAmenca Corp. and ITT Corp.. blacks 
I lost Jobs at more than twice the rate of 
I their companies' overall workforce reduc- 
tions. 

Companies say the sudden demo- 
graphic shift is a statistical Duke, the 
unintentional fallout of corporate ad- 
backs and reorganisations. But some drfl- 
rtghts advocates argue that something 
more Insidious Is going on. 



tsra," says George Priser. who pub- 
lishes directories of black professionals. 
People doot even know these pattens 
and behaviors are being initialed until you 
begin to tee the pieces of the punk 
together aad look at the numbers." 

.v ln .! *2i!5 ls - "* K - Jfl companies 
thai PJed KEOC reports for more than 40 
minion workers ln both 1990 and 1991 the 
Journal found: ' 

• Blacks lost a net 59.479 jobs at these 
businesses during the recession, which 
officially began in July 1990 and ended in 
March 1991. Overall, blacks' share of 
Jobs at the companies dropped (or the first 
time in nine years, wiping out three years 
of gains. Black employment at the compa- 
nies fell in 36 states and in six of nine 
major Industry groups. 

•By contrast, Asians and Hispanics 
who In recent years have become more 
vocal about getting their share of jobs. 

Not Employment Change* 

Fiora 1990 10 1991. m thousands. 
at companies reporbng to EEOC ' 
to 




Ha a Atom Dimo witn 
Sane K* Sne Jmru a*, 



both made gains. Asians gained a n< 
55.104 jobs during the recession and His- 
panics a net 60.040 jobs. Whites who 
outnumber blacks nearly eight to one at 
these companies, gained 71.144 jobs. 

• Black workers were especially hard 
hit in blue-collar jobs, losing nearly one- 
third of the net 180.210 such slots lost. Tbey 
were the only group to lose service-worker 
positions, dropping u.qb sua, ^^ w ^ it 
businesses added 53.548 new ones They 
were the only group to lose sales Jobs. 

• Blacks did show some progress in 
several highly priied white-collar job cate- 
gories. They gained a disproportionately 
high number of managerial, professional 
and technical jobs. But they held such a 
small percentage of these jobs before the 
recession began that their actual gains 
were meager. Companies added a net 2,n» 
black managers during the recession 
bringing the 1991 number In 248.915 which 
Is just 5.2% of the total for an races. 

Even with the Job losses, black workers 
represent a higher share of the staffs of 
EEOC companies than of the U.S. popula- 
tion (11.8%) or of the overall U.S. work 
force (10.4%). Considering the slie and 
locations of the EEOC companies they 
could be expected to have more than the 
nationwide proportion of black workers. 

Yet blacks, who accounted for 12j% of 
the work force of companies filing with the 
EEOC. not only lost t disproportion- 
ately high share of jobs in companies that 
cut staff, but also gained a disproportion- 
«ease 7Vrni to Aje ^ ;t Cblionn / 



Cowrjiued From tint Aaje 
atety low share of positions added during the re- 
cession. They tost 15% of the jobs at the roughly 

half of EEOC firms that had net employment ruts 

iK.-7?"i. rece$,<>n ln Anwric * mua depression in 

^,t^K? >mn,Un " y ' **** Ctnt «**y- Presi 

m^^r D J T. U l, An J e,a ""*" * «* Nitional 
Black MBA Association. 

The losses can be partially explained by blacks 
relatively low seniority In companies and then 
heavy concentration in the types of jobs eumina;*! 
Corporations' continuing decisions to abandon 
toner-dry offices, factories or franchise outlet* 
didn l help blacks, either. 

But the demographic change suggests some 
tlung more fundamental has occurred, a ore- 

operates. Several companies with poor records of 
retaining blacks say they were mostly concerned 
with their aggregate minority employment rates 
and never calculated whether blacks bore a dispro- 
portionate share of cutbacks. Thus, they could 
claim to the government continued progress bv mi- 
norities as a whole even as blacks were suffering 
reversals -in some cases dramatic ones. 

Black workers had their biggest setbacks at re- 
tailers. About half of their losses were in retailine 
where blacks lost jobs at a SCJ higher rate than the 
overall work force. 

. At Sears. Roebuck & Co.. for example, blacks 
lost 54 r, of jobs cut. according to the rompa--.* 
original filing with the EEOC. After extensive ire- 
views with the Journal. UV compim s^.d i; 
discovered a gargantuan addition error in the num- 
bers it gave the government and printed in its an- 
nual reports for three years -a mistake thai 
exaggerated blacks' proportioo of job losses The 
revised records, which the EEOC is now invesceat- 
ing for accuracy, still show blacks losing a dispro- 
portionate 20% of the jobs cut by Sears The 
company's work force was 15.8"i black in 1990 



s. 



' EARS SAYS ITS BLACK work force wasn t 
burt because of inattention to diversity but bv the 
need to eliminate expensive distribution centers ir. 
the inner cities. The giant retailer dosed two majn- 
urban distribution centers In 1991. relocating par 
of the operations to suburbs largetv inaccessible t 
blacks without can. 

'" "It's not like we set out to eliminate black jobs," 
says a Sears spokesman. "We set out to streamline 
our catalog and distribution centers to make them 
snore competitive." TV centers, bnOt In the early 
1*0$, had been designed to house relatively smail 
merchandise and be accessible to railroads, the 
spokesman says. The new ones, be says, are built 
TnThe suburbs to be more convenient to trucks. 

.But several former black managers at Sears be- 
lieve that corporate indifference toward affirmative 
-actjon caused them problems during the recession 
and that this attitude grew throughout the l9S0s as 
federal enforcement declined, It appeared the 
company discontinued Its emphasis on having • di- 
versified work force," says Bob Johnson, Sean's 
first black rice president, who reared In 1991. 

like Sears, most companies say blacks' job loss- 
es wfcre completely unrelated to affirmative action. 
At W.R. Grace, for Instance, where blacks tost jobs 
at more than twice the rate of overall work-Iorce 
arts; officials say the drop was due entirely to 
Grace's extensive restructuring. 



110 




teo(V»dal bin. They *re "ry.^ery prejudiced, - 
trtA BeDow. t madilnlst. says of Grace's man- 
ageSeot tl lit Lake Oiarles. La., catalyst rnanu- 
Ucrdrtng plant. Wbco Uw company makes 
persQnod decisions, be asserts, they revert *lo the 
old "ta Crow ways.* 

. kfr. Booa says Grace has addressed (he black 
emp)ryees° complaints. 

Critics consider many companies - explanations 
abc*| Mack )oo losses boOov excuses, designed to 
hide unspoken bias. Charges Wesley Porlotls, who 
beads Wesley, Brown t Bartle, one of tbe nation's 
oldesj minority search Drms: There's a deep sour- 
ness in corporate America that they had to hire mi- 
nority professionals. Downsizing has been their 
first opportunity to strike back.* 

For many firms that cut a high percentage of 
black's In the recession, the reasons are tbe same: 
The/ closed or sold operations in inner cities. But 
whether the cutbacks reflect bias isn't easily clear. 

McDonald's Corp., for instance, says the statis- 
tic that blacks accounted for JfcK of its job losses 
in the 1990-9] period merely reflects the sale of 370 
corojjany-owoed restaurants to franchisees. While 
■nosrof these blacks probably now have jobs with 
(be new franchisees, the corporate switch could in- 
dicaft McDonald's was unloading many of its 
tanefdty restaurants to Mackj; the fas -food chain 

declines to say where the stores are located, but 
coateods the changes nefltd nothing' vibobi its 
inner -dry policies. 

Yet what looks lie abandoning the inner city 
may really be giving economic opportunity to an 
underprivileged group. Even attorneys who sued 
McDonald's on behalf of blacffruiclu'sees credit 
the company with givlng'blacks'u'beral franchising 
terms, mating It possible for some to own < busi- 
ness for the first tune in (heir ores . - ' 

Geography plays a major role in black-emplov 
men! patterns. At BankAmerica, blacks did pooriy 
during the recession because of attrition combined 
with the fad that the company expanded tn states 
thai have low black populations,' sucV as 1 ' Arizona 
and New Mexico, says spokesman Russ Yarrow 

" BHctV "accounted for "&.'■* arfbTW'jcbifevea i 
though they made up Just 7J» of the company's 

j, work force before the recesjv-t^j "jj ylirnr ■ i- 
Companies say they didn't deliberately' reduce 

'-• their black work forces, 'i'jtf^percefltagtfli blades'- 



>-.r:.'^»^,^--.J,;,j:-.-| 
got laid off, though, because they heM more of the 

■ jobs companies dedded to eliminate. Trf savs lk 
Mack wort force was hurt when It stopped Z 
tog "V ^ ra ipnJ ) 0e)5ftM lH ^^^ i Xouli^ 
West Palm Beach.' Ha. BlackficV&nWfa *£% 

^of the lobs lost at rrr Anini-*c-^sJSzSL--' n 



what the federal government focusa or wbeajJt 

evaluates alTirmaU?e-action etonr^ '■'' 

Even at companies with aggressive diversity 
programs, such as Dial, black workers can lose 
ground. Dial says Its attorneys carefully reviewed 
layoff plans lor adverse unpad before any downslx- 
Ing took place. But company orficiais say they as- 
sessed the effed on overall minority and female 
employment rather than on blacks, Hispanic* or 
Asians separately. 



B. 



f the Jobs lost a( riT 

rsslon VortTorce, pni 
sses, ,*ayi Jim, GaTL... 
lacks held «2 of the 'tK 



rbe"! 

' b&auset* (bese botef 
• « HT ipolesman. 1 
Jobs at these hotels. 



' UCKS AT DIAL LOST JOBS at a rate two- 
thirds higher than did Its work force as a whole. 
Dial's overall record lor minorities, however, looks 
exemplary, especially if white females are Includ- 
ed, because Dial added Asians and American Indi- 
ans and laid off a disproportionately small 
percentage of white women. 

"I feel confident that the process we established 
ensures equiuMe treatment.* says Joan IngaHs, 
Dial's vice president of human resources. 'It's not 
appropriate to offer preferential treatment.* { 

Like Dial. Sears boasts of inroads made bj its 
minority sUfi, which occurred because Asians and 
. ffispania fared better during tt* recession than 
Sears't overall wort force. Comparing blacks' 
achievements to other minorities a 'a skewed 
point of view." says William Giffii.. Sean's direc- 
tor of human resources. What matters, he says. Is 
Sean's overall minority employment record. 
"What we bold our managen accountable for Is 
wort-force diversity.* i 

Ova-rights attorneys are skeptical of such ex- 
planations. The first thing that makes me suspi- 
cious is if companies are aggregating all tbe 
minorities together." says Barry Goldstein, a 
prominent civil-rights lawyer. 

But the Office of Federal Cootrad Compliance 
Programs,^ which Investigates discrimination at 
businesses ihat receive government money, decides 
wMciT-tpmnanle*: to audit by anar/ring fljetr 
fj records OTpveran minority employment. Only after 
r^ragfljes^ are selected for an audit wffl Investlga- 
» tors'toMdef Examining records on Individual eth- 
nic *<8PlP?&>ap*, says Annie BlackweO, the 
program's policy director. And they win do the Indi- 
vidual ethnic analysis, she says, only *if there's a 
reason to do H.* 

OvO-rights advocates argue that under the guise 
Lj£HKL*i *"!•. 1Br, P ,ovtr "' can hide differentia] 



, — -,.-* jw* «i mese notels. 

. mainly as waitresses and room mt«Jta*M i5lBte 



Ill 




mhtsOfe 

Ihe Reagan ad- 
promotinr the 



' wVlch^orftey compuUnttal 
gBOC began being Irtamed « 

them u on* bit disadvantaged group. The HSOC 
&ho shifted 1U enforcement efforts away from 
class-action suits spins companies, focusing in- 
. «M,d on individual case c< discrimination. . 

MTirmative action was weakened even more dur- 
lne (he recession because of a series of Supreme 
Cum decisions thai made it harder for individuals 
' to sue companies lor (liscrimination. By the late 
1380s, companies were much more fearful of private 
' tltieators than the government, says Jonathan 
Leonard, a professor at the University of California 
! iiBerteleT who studies workplace (liscrimination. 
With the courts Wards Cove decision m 1989. which 
made it tougher for minorities to use statistics to 
Drove racial bias, companies suddenly became near- 
ly immune to job discrimination challenges until the 
Civil Rights Act was passed in 1991. he argues. 
; At Sears Mr. Johnson, the former vice presi- 
dent, and other black employees say they felt the 
Imoact of Reagan and Bush administration policies 
' almost immediately. They saw the government s 
broad-based race and gender discrimination inves- 
tigation into Sears during the late 1970s trans- 
formed into a weak se^-discrimination case in the 
19ius that the compa:.;. ultimately won. And in the 
middle o( the EEOC s Uwsun against Sears, they 
watched then Sears Chairman Edward Telling stop 
doing business with the federal eovernment to 
protest what be perceived as the Labor Depart- 
ment's •campaign of harassment. _. . 
' What resulted, says Mr. Johnson, was a gradu- 
«L steady erosion of black workers that occurred 
quietly and with tittle discussion. The mnnberof 
bucks who held (he key buyers' jpbs dwndledfrocn 
»u>1981tol4inl3Bto seven or eight in 1990. be 
says Sears wool release the numbers, but says (he 
drop of blacks was proportional. 

Tne reduction wasnt due to any deliberate cam- 
Mien to eliminate blacks. Mr. Johnson and others 
my it was s combination of the old-boy netwotV 
trying a stronger role during *&. *"****: 
theVstv plus black workers getting so discouraged 
by the atmosphere that they became eager to lake 

eartv retirement buyouts. . 

Barbara Samuels, who joined SearsjnWG^says 
— she took early retirement at age 54 in 1991 because 
■1 tell the place was being detrimental to my men- 
tal and physical health." One month after she was 
named the company's buyer of the year.ln 1987, she 
uvs her boss gave ber a performance evaluation 




Jake |*| lathed 
bung fhafi 
PWsyi^ 

pa ha 

lea. If J 

Blacks who held J0t» ^voMhg "public" u«. 
had an especlaHy rough time during the recession. 
EEOC records show. . . 

They Ion i.Kn tale* job* overall In UW. for 
Instance, even though companies added a net 
total of more than 0.000 white, Asian and His- 
panic sales workers. There's a continuing prob- 
lem that white companies win not buy trom a 
black salesman, - says John Wort a career con- 
sultant and author of "Race. Economics and Cor- 
porate America." 

At least one recent study suggests that radsm 
stiD plays a role In some personnel decisions. In 
1990, the Urban Institute sent out teams of Mack 
and white job applicants with equal credentials. 
The men applied for the same entry-level Jobs to 
Chicago and Washington, D.C.. within noun of 
each other. They were the same age and physical 
size, had Identical education and work experience, 
and shared similar personalities. Yet In almost 20% 
of the 476 audits, whites advanced farther In the 
hiring process, researchers found. 

"The simple answer is prejudice." says Margery 
Turner, a senior researcher al the Urban institute 
involved in the study. "Clearly, blacks still suffer 
from unfavorable treatment." 



0„ 



' COURSE, NOT ALL job applicants hast 
similar credentials. Most blacks cant even be con- 
' sMered for highly skilled jobs because they don't 
have enough education. Only 13.1* of blacks In the 
wort force have college degrees, compared with 
24. n of whites and 3U% of Asians, according to 
the t99» Census, :; »•■*-■ 

~'"Z1. -;.— ..•... ,vi-'.: 

The better-educated Asians managed to gain 
jote even in states that cut tens of thousandVof 

????? J . erlU ' AsUns &*<* *** bi tnldstie 
»nd big businesses In 39 states, while Nacbtost 
ground In 36 states. 

i BacbwereWt particularly bard in Florida, lot- 
tog jobs at KBOC eolations' at a rato^rVnS 
rive times that of the overall workforce redudtasl 
^Tfcey were the only radal group to lcWSittere 

otovees " Although blacks bore a disproportionate ".000 of the 71,230 jobs eliminated while Asians 
Lhirfof job losses at Sears in the recession, their ^P^e <"<« than 9.000 positions.. *H ^T- ■ 

rsenfoflty saves many bfiie collar workers froniS 1 
L unemplc^enlJnecbe^dayV^. ^Atorr.-iyi < 



112 



- bioce oucu vert onto among the lut hired 
tor these Jobs, they were frequently Ox Ont to go. 
At USX Corp.. which tort Marty • tenth of Ki al- 
ready decimated work force Id l»l. employees at 
tome plants had to have almost 20 yean' experi- 
ence to keep their Jobs. Blacks lost nearly 29% of 
those Jobs tost at the company, even though they 
made up Just 12.6% of the work force |otn| Into 
the recession. • ' 

Discrimination problems In the steel Industry 
were supposed to have been sotted In the WTOt, 
when the EEOC required companies to change their 
rules on promotions and transfers. Until then, 
openings weren't posted throughout plants, and 
people who wanted to change departments tost 
their seniority. 

Initially, the changes helped blacks get better 
Jobs. Even if they had been hired into a dirty, dan- 

, gerous unit, they had the chance to learn about 
and accept better positions, knowing their seniori- 
ty was secure. 

| But at t'SX. the new rules that allowed blacks' 

advancement In the 1970s ended up accelerating 
their job losses In the 1980s, when the company 
had massive layoffs. That's because of USX's 
plantwide labor pool, which allowed blue-collar 

, workers who were laid off to bump people out of 
Jobs In other departments, if they met qualifica- 
tions and had seniority. 

Blacks who could overcome the seniority hurdles 
often stumbled when faced with the company's new 
testing requirements, says Billy Hawkins, chairman 
of a union grievance committee at USX's plant In 
Gary. lnd. Suddenly, blacks with 25 years' seniority 
were being rejected for jobs because Uie> couldn't 
read rulers-even though rulers weren't even used 

, on the Jobs. USX says the stiff er tests are aO job re- 

( lated and needed since the steel industry is more 
technology-driven than before. 

I Blacks could do longer get training to qualify for 

skilled Jobs either, as USX eliminated its craft- 
training programs in the mid-lS80s because of the 
availability of unemployed craftsmen. As a result, 
' parts of the plant that were tratfibonaDy black have 

started turning white, llr. Hawkins says. 
f "It's really ironic* adds Frank Webster, anoth- 

er union representative. "Blacks were caught by 
' the very thing that was supposed to protect them. 
We're seeing the end results of discrimination. 
; We're right back to square one.* 

- Asm Q. fkmani and Gregory N. ttaa 
contributed to this article. 



113 



BLACKS DID BETTER AT SOME COMPANIES 



; Not all companies lost a dis- 
proportionate share of their black 
employees in the last recession. 
• American Telephone & Tele- 
graph Co. managed to retain its 
percentage of black workers, de- 
spite |ob cuts. "We monitored 
wTiat was happening, and we 
worked awful hard," says Anne 
Rite, an AT&T human resources 
nianager. "We tried to be fair to 
everybody." 

■'■ But most companies that lost 
only a small percentage of black 
workers, or even gained blacks, 
did so mainly because of a geo- 
graphical fluke, such as selling 
businesses or trimming staff in 
largely white neighborhoods. 
Like corporations tha! lost a dis- 
proportionate share of blacks, 
these companies say they had 
no idea their restructuring would 



have such a disparate impact on 
its employees 

Black employees also benefit- 
ed from earty-retirement pro- 
grams at a few companies. 
Blacks lost only five of 835 jobs 
in Eastman Kodak Co.'s early-re- 
tirement buyout because most 
of the workers who qualified for 
the program were white males 
hired in the 1950s and 60s. The 
departures of these employees 
created some vacancies that 
were filled by a greater share of 
minorities, Kodak says. 

AT&T had similar early-retire- 
ment offers in the 1980s which 
allowed it to maintain its level of 
staff diversity despite Passive 
d0'.v:is : .::"3s Sjt .v 1 ":' *« :: — 
pany began layoffs in we 1990s 
h decided to look fcr otrter ways 
to ensure that minorities wouldn t 



be hit harder than the overall 
staff. AT&T says it wanted to 
avoid any undoing of an Intensive 
affirmative action effort dating 
back to 1973. following the filing 
of sex and race discrimination 
charges against it by the EEOC. 

So. during the recession, 
AT&T began reducing its payroll 
by offering employees two-year 
unpaid leaves of absence. It also 
laid off workers, but offered- 
them several ways to try to stay 
with the company. AT&T 
launched an in-house employ- 
ment service to help these emj 
ployees find other jobs at the • 
I company, and created a tempo- 
, rar, >,u't. poo. er.abi ng tnem to 

i ing temporary assignments in- 

S!0e AT&T 
I These efforts seem to have 



worked. The company's payroll 
was 16.4", black in 1990 And 
of 18.525 employees who tost 
their |obs in the recession, aboui 
16% were black. 

For mosl companies, howev- 
er, black job gains came by 
chance. There isn't any specific 
consideration given to minority 
status," says Barry Lacier, a 
spokesman lor Louisiana-Pacific 
Corp., where the black work 
lorce grew by 7.7% in 1991. 
even as the company cut its 
overall staff by 6.1%. 

The reason for the gain? 
Location, location, location. 
The company eliminated jobs 
in its rural Northern California 
c!2t!s tha' *"*'* '•••' t*'*--';*-3c 
wmle adding workers in 
Southern states with large 
I black populations. 



114 



WHERE BLACK LOSSES WERE MOST DISPROPORTIONATE 



■M Kk» - *" *1* »«« imM ttlr fkwt tlte T** 









cotfnar-i. 



Of im Of TOOL JOi -con . 

Normal aMtoa; expanded '■ Mw» and Hew Uodcn. aMdl 

rjvt srruJ bUck pocvUDom. 



Dosed drstnbutcrt amen r mnei crbes. inmmed deno) and 
support sad in stores. Says b numbers are faulty. FtOC 
hasn't yd deeded whether to accept *J revise* submosan. 

Shut down two Phittdelpha plants wrUi high concentrabons 
of blacks and consolidated production at another ptutadetpBia 
plant with one «i New Jersey. 




Had major restrudunng Demographic changes were if eded 
by the raoal ma of companes sok). including a last-lood 
business. 



When sales decreased, the bottling company reduced bh* 
coflar wort force, which had high percentage ot blacks 



Stopped managing Sheraton hotels m Dallas, St. Lours and 
West Palm Beach. Fta . where work force was more than a 
third black. 



Sold two facilities in the South, both ot which had work forces 
that were more than MS Mack. 



Phased out part-time workers and added lull-lime worke-s 
surprised Dy oemog'apnic change but.prooabiy Oue SC 
opening more stores m suburban areas. 



Sold plant m Sumter. S C . where work force was SOS Kack 
01 the 671 blacks who tost jobs. GOO worked in Sumter Uosi 
now work tor the new owners. GokOast. Inc 



_ __ ,, __ Moved denal, data processing stall trom New York Ccy to 

J6.59 &7.6S 1.87. oetrwan 



Cut aircraft service workers and food senna workers because 
of Eastern Airlines bar.kruptty and dosngs ot restaurants and 
auto plants Uotf" work forces had high percentage ot Hacks 

Lost blue cottar workers. M off by unions seniority rues 



Eighty-one percent ot downsizing occurred «i manufacturing 
and held organizations, where 91% ot black workers were 
concentrated 

Dive suture ot MaybeBne Cosmetics accounted tor 70% of (he 
btactton. 



Projects ended in Southeast where labor force has l»gh 
percentage of btacks. 

Stopped production at Columbia. Md.. pUnt which was 39% 
black, and Dee ro. m, plant, which was 80% black. 



Sold more than 200 corporate-owned stores to franchisees. 
01 these. &3 were sold to black franchisees. 



Closing ot plant near Philadelphia, layoffs accordmg to 
rule*. 



As part of restructuring, sokl businesses it Northeast and 

MlOwtSl, WMN WptnOwg D UU n tSS eS 81 MCSa. MIL, Iflu US 

Angeles, where there art smafttr bbcfc poouial ons. 

Acquired subsidiaries with tow vonottinfiom of bUcfa The , 

core company actuary Increased b percentage ofbfcdcr 
work tons. 



6.886/10.51 1.53 

J.fev 

I ■a^jM WfMl 18 HOC. 



115 



HOW THE DATA WERE ANALYZED 



To examine how black 
workers fared in the reces- 
sion; The WaB Street Journal 
analyzed employment -J- ; 
changes at 35.242 companies 
that filed reports with " 
Equal Employment Opportune • 
ty Commission in 1990 and 
19917 More than 40 million 
employees, or about a third of 
the labor force." work for these 
concerns. The Journal also 
analyzed changes in black em- 
ployment at each of about 400 
of the nation's largest federal 
contractors in terms of market 
capitalization. - 

The reports provide a 
comparison of employment 
at the nation's larger busi- 
nesses before and after the 
latest economic downturn, 
which officially began In Jury 
1990 and ended in March 
1991. (In 1990. the'compa- 
nies had to report personnel 
information for one payroll 
period between January and 
March, but because of a reg- 
ulation change, they didn't 
have to file their 1991 reports 



until the third quarter, after 
the recession ended.) 

Businesses with 100 or 
more employees must teH 
the EEOC yearly the number 
of women and minbrtbes 
Jhey emp!c^>iitli break- 
downs Tor specrrtcjob cate- 
gories. Companies with 50 
or more employees and a 
U.S. government contract of 
at least $50,000 must file re' 
ports too. 

The Journal obtained 
computer tapes of all 1990 
and 1991 EE0C reports, but 
with the company names 
deleted To compare individu- 
al companies, the Journal 
used the Freedom of Infor- 
mation Act to obtain summa- 
ry employment firings for the 
largest federal contractors 
from the Labor Departments 
Office of Faieral Contract 
CompBance Program. 

To analyze blacks' treat- 
ment at federal contractors 
where total employment fefl 
by 500 or more between 
1990 and 1991. the Journal 
calculated what percentage of 
each company's work force 



was .black m 1990 and then 
determined what percentage 
of the employment decline 
between 1990 and 1991 rep- 
resented Mack workers. The " 
black job-toss index was : , 
computed by dividing the . ■ 
first calculation Into the sec- 
ond.rf a company had a staff - 
that was 16% black in 1990 
but blacks accounted for 
24% of Its decline in employ- 
ment, the company's black 
job-loss Index would be 1.50. 
. Thus, the larger the black 
job-loss index, the more dis- 
proportionate the staff reduc- 
tion was lor blacks. A 
number of less than one indi- 
cates the jobs of blacks were 
eflminated at a tower rata 
than their 1990 representa- 
tion at the company. 

The reports submitted by 
the federal contractors aren't 
adjusted tor corporate actions 
such as the sale or acquisition 
of a business. Thus, the year- 
to-year comparisons show 
the changing racial makeup of 
a company's work force, not 
! necessarily actual layoffs 



116 




117 







118 

Mr. Peterson. Toby, how long do you need? Five minutes 
enough? 

Mr. Malichi. Yes, sir. 

Mr. Peterson. All right. Here goes the clock. We appreciate you 
being with us. 

STATEMENT OF TOBY MALICHI, PRESIDENT AND MANAGING 
DIRECTOR, MALICHI DIVERSIFIED, LTD., INDIANAPOLIS, IN 

Mr. Malichi. Thank you, sir. 

Mr. Chairman, members of the committee, I want to thank you 
for allowing me the opportunity to submit testimony to the House 
Government Operations Committee, Subcommittee on Employ- 
ment, Housing, and Aviation. My name is Toby Malichi, I am the 
president and managing director of Malichi Diversified, Ltd. 

We are international brokers and agents located in Indianapolis, 
IN. I also serve on the board of directors of the U.S. Chamber of 
Commerce and the Chamber's International Policy Committee and 
Council on Small Business. 

First, I must commend the committee for taking an indepth look 
into the issue of the North American Free Trade Agreement and 
its impact on blue collar, minority, and female employment. Mr. 
Chairman, I feel like David in the land of the giants. Nonetheless, 
I will proceed. 

I am a small business owner and a small business advocate, but, 
Mr. Chairman, I also am a single parent of two. My daughter is 
10, my son is 14, and I am also a product of a broken home. I know 
firsthand the trials and tribulations of dealing with running a busi- 
ness, raising a family, and overcoming enormous environmental ob- 
stacles. 

We cannot blame NAFTA for the problems that already exist. 
NAFTA is a critical response to the increasingly competitive global 
economy. NAFTA will allow us to effectively compete with the Pa- 
cific Rim trading bloc and the European Community. NAFTA 
would lower trade barriers for exportation of our products and serv- 
ices into Mexico. 

We have already entered into an agreement for this purpose with 
Canada. Our automobiles and our computers will be cheaper for 
Mexicans to buy. This helps our economy by creating jobs in these 
and other sectors of the economy. 

Right now companies can flock to Mexico or elsewhere to take 
advantage of that country's lower labor costs, if they so desire. 
Companies have not done so because they know that labor costs 
are but one of many factors that determine where production takes 
place. 

It has been said many times, Mr. Chairman, before, but if labor 
costs were the main reason companies chose a place to invest, Haiti 
and Bangladesh would be the economic power houses. Labor costs 
are just a small part of the entire cost of producing a product. 

Other factors like transportation costs, not to mention stable po- 
litical climates, and positive economic policies actually make it 
cheaper in many cases for a company to produce a product in the 
United States. Our economy, while still strong in manufacturing, 
has shifted more toward a service-oriented activities. 



119 

The jobs in the 1990's and beyond will be created in high tech- 
nology and high-skill areas. When our country moved from an 
agrarian economy to a manufacturing one at the turn of the cen- 
tury, we had to adjust to the changing market. 

Now, we have to adjust again. Low wage, low-skill jobs have al- 
ready left the country, Mr. Chairman. We have to expand our hori- 
zons and our long-term thinking to create new opportunities for our 
youth and our unemployed. We can do this through strengthening 
our educational system, increasing literacy, and strengthening the 
family. 

NAFTA is a trade and economic issue, not a political one. The 
economy is ever expanding and ever changing. Unskilled jobs have 
been leaving the United States for sometime without NAFTA. 
Many have gone to Asia as well as to Latin America and elsewhere. 

American workers historically have been competitive, but we 
have been losing our confidence. We shouldn't fear competition. 
After all, Mr. Chairman, it is all about attitude. NAFTA will allow 
American companies to compete more effectively because it lowers 
trade barriers. NAFTA will help keep American businesses here as 
performance requirements on United States investors are abolished 
and Mexican trade tariffs are reduced. 

General Motors, and, Mr. Chairman, I am a former General Mo- 
tors executive, recently relocated a manufacturing plant from Mex- 
ico to the United States; 1,000 jobs were brought back. Forty-eight 
States have expanded trade with Mexico since 1985, 1987, includ- 
ing my own State, Indiana. United States exports to Mexico have 
increased from $12.4 billion in 1986 to $40.6 billion in 1992. Over 
400,000 jobs have been created as a result of this increased trade 
with Mexico. 

Mexico is the second largest market after Canada for our manu- 
factured products. There are also many small and medium-sized 
businesses which are involved with international trade. Many of 
these firms, like my own, are minority owned, and these companies 
create employment opportunities. 

My company, Mr. Chairman, Malichi Diversified, Ltd., as 
intermediaries help American companies find and locate trade op- 
portunities that will increase their sales and profits, thus creating 
more jobs. Whether or not we are members of a minority group, all 
of us have to be prepared to deal with the changing world we live 
in. If you do not have a college degree, you will be left behind in 
the new economy. If you have the education and the training, you 
are better equipped to deal with the new economy. If you don't 
have these tools, you are competing in the market around the globe 
with workers who will work for — for the lower wage than our pre- 
vailing minimum wage. 

We nave to think long term. Simply protectionism, as appealing 
as it may sound, is no solution. We must face the future and pre- 
pare for it, not nold on to the past. NAFTA is not a panacea for 
our economic problems, it was never intended to be, but defeating 
NAFTA won't help, either. All that will do is confirm our reluctance 
to face the challenges we need to face and cost us some significant 
business and employment opportunities in the process. 

Mr. Chairman, on one side we have pro-NAFTA, on the other 
side we have Mr. Ross Perot and his following. We took them out 



120 

into the woods for a retreat, Mr. Chairman. I left them out there. 
I said, OK, gentlemen, chop some wood. The pro-NAFTA person 
started chopping wood, chopping wood, chopping wood. Ross Perot 
started chopping wood, chopping wood, and chopping wood. Ross 
Perot never looked up, he never looked around, he just chop, chop, 
chop, chop. He kept his head down and chop, chop, chop, this is the 
way we have always done it. 

While the person from pro-NAFTA would chop wood, chop wood 
and chop wood, but every nour on the hour, he would stop and take 
a 15-minute break. This went on about 3 or 4 hours, Mr. Chair- 
man, but yet the piles of wood remained the same, but every hour 
on the hour the pro-NAFTA person would stop, take a 15-minute 
break, while Ross Perot would chop wood, chop wood, chop wood, 
never look around, never stop, just chop, chop, chop while the per- 
son from pro-NAFTA would stop every hour on the hour, take a 15- 
minute break, but yet, Mr. Chairman, the piles of wood remained 
the same. 

After about 10 hours I came back out, I said, OK, gentlemen, 
let's get the retreat on. Ross Perot angrily shouted out, wait a 
minute, hold it, pal, I have been chopping wood here 5, 6, 7, 10 
hours, I chopped wood consistently, constantly, I never looked up, 
I chop, chop, chop, while the person from pro-NAFTA, every hour 
on the hour would stop and take a 15-minute break. I don't under- 
stand because the piles of wood have remained the same. 

The person from pro-NAFTA said, wait a minute, you hold it, Mr. 
Perot. For every hour on the hour you thought I was stopping to 
take a 15-minute break, I was actually taking time out to sharpen 
my axe. 

I challenge this committee, Mr. Chairman, for us to take time 
out and sharpen our axe with NAFTA, to think smarter and not 
necessarily work harder. 

I thank you for your time, Mr. Chairman, and have a successful 
day. 

[The prepared statement of Mr. Malichi follows:] 



121 



TESTIMONY OF TOBY MALICHI 



President and Managing Director 

Malichi Diversified, Ltd 

Indianapolis, Indiana 



BEFORE THE 

HOUSE GOVERNMENT OPERATIONS COMMITTEE 

SUBCOMMITTEE ON EMPLOYMENT, HOUSING AND AVIATION 



NOVEMBER 10, 1993 



122 



Mr. Chairman, members of the Committee, I want to thank you for allowing me 
the opportunity to submit testimony to the House Government Operations Committee, 
Subcommittee on Employment, Housing and Aviation. 

My name is Toby Malichi. I am the president and managing director of Malichi 
Diversified, Ltd, an international brokerage and agents firm located in Indianapolis, 
Indiana. 

First, I must commend the Committee for taking an in-depth look into the issue 
of the North American Free Trade Agreement and its impact on blue-collar, minority 
and female employment 

I am a small business owner and a small business advocate. But I am also a 
single parent and the product of a broken home. I know first-hand the trials and 
tribulations of dealing with running a business, raising a family, and overcoming 
enormous environmental obstacles. 

We cannot blame NAFTA for problems that already exist. NAFTA is a critical 
response to the increasingly competitive global economy. 

NAFTA will allow us to effectively compete with the Pacific Rim trading bloc and 
the European Community. 

NAFTA would lower trade barriers for exportation of our products and services 
into Mexico. We've already entered into an agreement for this purpose with Canada. 

Our automobiles and our computers will be cheaper for Mexicans to buy. This 
helps our economy by creating jobs in these and other sectors of the economy. 

Right now companies can flock to Mexico, or elsewhere, to take advantage of that 
country's lower labor costs, if they so desire. Companies have not done so because they 



1 



123 



know that labor costs are but one of many factors that determine where production takes 
place. 

It's been said many times before, but If labor costs were the main reason 
companies chose a place to invest, Haiti and Bangladesh would be economic 
powerhouses. Labor costs are just a small part of the entire cost of producing a product. 
Other factors like transportation costs - not to mention stable political climates and 
positive economic policies - actually make it cheaper In many cases for a company to 
produce a product in the U.S. 

Our economy, while still strong in manufacturing, has shifted more toward service- 
oriented activities. The jobs in the 1990s and beyond will be created in high-technology 
and high-skill areas. When our country moved from an agrarian economy to a 
manufacturing one at the turn of the century, we had to adjust to the changing market. 
Now we have to adjust again. 

Low-wage, low-skilled jobs have already left the country. We have to expand our 
horizons and our long-term thinking to create new opportunities for our youth and our 
unemployed. We can do this through strengthening our educational system, increasing 
literacy, and strengthening the family. 

NAFTA is a trade and economic issue. The economy is ever-expanding and ever- 
changing. Unskilled jobs have been leaving the U.S. for some time, without a NAFTA. 
Many have gone to Asia, as well as to Latin America and elsewhere. American workers 
historically have been competitive; but we've been losing our confidence. We shouldn't 
fear competition. 

NAFTA will allow American companies to compete more effectively because It 
lowers trade barriers. NAFTA will help keep American businesses here, as performance 
requirements on U.S. investors are abolished and Mexican tariffs are reduced. General 
Motors recently relocated a manufacturing plant from Mexico to the US. One thousand 



124 



jobs were brought back. 

Forty-eight slates have expanded trade with Mexico since 1987. U.S. exports to 
Mexico have increased from $12.4 billion in 1986 to $40.6 billion in 1992. Over 400,000 
jobs have been created as a result of this increased trade with Mexico. Mexico is the 
second largest market after Canada for our manufactured products. 

There are also many small- and medium-sized businesses which are involved with 
international trade. Many of these firms like my own are minority-owned, and these 
companies create employment opportunities. 

Whether or not we are members of a minority group, all of us have to be 
prepared to deal with the changing world we live in. If you do not have a college degree 
you will be left behind in the new economy. If you have the education and the training, 
you're better equipped to deal with the new economy. If you don't have these tools, you 
are competing in the market around the globe with workers who will work for a much 
lower wage than our prevailing minimum wage. But we have to think long-term. Simple 
protectionism, as appealing as it may sound, is no solution. We must face the future and 
prepare for it, not hold on to the past 

NAFTA is not a panacea for our economic problems. It was never intended to 
be. But defeating NAFTA won't help either. All that will do is confirm our reluctance 
to face the challenges we need to face, and cost us some significant business and 
employment opportunities In the process. 



125 



Mr. Peterson. Thank you, we appreciate you all being so patient 
and we will make your statements part of the record and we will 
submit questions to you, and we will give you a few days to answer 
them, and I will look at your charts, Dr. Hinojosa. 

Thank you all, very much. The subcommittee is adjourned. 

[Whereupon, at 5:35 p.m., the subcommittee adjourned, to recon- 
vene subject to the call of the Chair.] 



APPENDIX 



Material Submitted for the Hearing Record 
ch. 93 public officers and employees 18 § 1913 

§ 1912. Unauthorized fees for inspection of vessels 

Whoever, being an officer, employee, or agent of the United States or any 
agency thereof, engaged in inspection of vessels, upon any pretense, receives 
any fee or reward for his services, except what is allowed to him by law, 
shall be fined not more than $500 or imprisoned not more than six months, 
or both; and shall forfeit his office. 

(June 23. 1948, c. 645. 62 Stat. 792.) 

Historical and Revision Notes 

Reviser's Note. Based on Title 18, U.S.C . steamboats" In view of 19*4 Reorganization 

1940 ed.. j I9e (Mar. 4. 1909. c. 321. 9 107. P|»„ No. 3. eft July 16. 1946. 11 F.R. 7873. 

35 Stat. 1 107). 60 St8 , 1097 ^boi^ng inspector* and trans- 

The phrate "officer or employee of the ferrlng their functions to the Coast Guard. 
United States or any ogency thereof w«s 

substituted for the phrase "Inspector of Minor changes were made in phraseology. 

Cross References 

Inspection of vessels, generally, see section 3301 et seq. of Title *6. Shipping. 

West's Federal Forms 
Sentence and fine, see § 753 1 et seq. 



Library References 



Shipping <s=l7. 
CJ.S. Shipping § 12. 



§ 1913. Lobbying with appropriated moneys 

No pan of the money appropriated by any enactment of Congress shall, 
in the absence of express authorization by Congress, be used directly or 
indirectly to pay for any personal service, advertisement, telegram, tele- 
phone, letter, printed or written matter, or other device, intended or 
designed to influence in any manner a Member of Congress, to favor or 
oppose, by vote or otherwise, any legislation or appropriation by Congress, 
whether before or after the introduction of any bill or resolution proposing 
such legislation or appropriation; but this shall not prevent officers or 
employees of the United States or of its departments or agencies from 
communicating to Members of Congress on the request of any Member or 
to Congress, through the proper official channels, requests for legislation or 
appropriations which they deem necessary for the efficient conduct of the 
public business. 

Whoever, being an officer or employee of the United States or of any 
department or agency thereof, violates or attempts to violate this section, 
shall be fined not more than $500 or imprisoned not more than one year, or 
both; and after notice and hearing by the superior officer vested with the 
power of removing him, shall be removed from office or employment. 

(June 23, 1948, c. 645, 62 Stat. 792.) 

637 



128 



THE NEW YORK TIMES OP-ED WEDNESDAY, NOVEMBER 10, 1993 



In America 



BOB HERBERT 

Nafta 

And the 

Elite 



The intellectual and political elite 
have lined up in support of the North 
American Free Trade Agreement, 
but it's the grunts, the ordinary work- 
ing men and women of America, who 
will face the consequences in the 
form of wage contraction, lost jobs 
and reduced standards of health and 
safety. 

It's too bad Ross Perot is the lead- 
ing opponent of Nafta. Working peo- 
ple deserve better. When Mr Perot 
starts waving his arms, tossing out 
misleading data and shrieking about 
"that giant sucking sound." his noise 
drowns out the serious discussion of 
the problems with Nafta 

American workers have been ham- 
mered for a decade and a half and 
they're scared. Now comes the Clin- 
ton Administration — which claims it 
stands for change — and it decides to 
go to the mat politically for a trade 
agreement that is the delight of Re- 
publicans in Congress and the multi- 
national corporations 

Why wouldn't workers be wary? 
These are the same corporations that 
have made downsizing their mantra, 
thereby terrorizing millions of em- 
ployees and their families. It's clear 
what the corporations want and 
Nafta helps them get it : an expanded 
market, cheaper labor and less re- 
strictive health and safety standards. 

The catastrophic scenarios offered 
by Mr. Perot and others are not in the 
cards. Nafta is a relatively modest 
trade agreement. But American com- 
panies and jobs are already going to 



It's the 

grunts 

who will 

suffer. 



Mexico and common sense suggests 
that this would only increase under 
Nafta 

In a letter to President Clinton this 
week. Ralph Nader, who opposes 
Nafta, said. "It is known inside your 
circle of White House and corporate 
allies that companies are pursuing an 
informal moratorium on announced 
relocations of factories to Mexico un- 
til after the Nafta vote in Congress." 
Mr Nader said a similar moratori- 
um had been observed by companies 
operating plants in Canada before a 
decisive vote on the Canada- U S Free 
Trade Agreement in 1988 For a vari- 
ety of reasons it was cheaper, under 
that trade agreement, for the compa- 
nies to operate the plants in the U.S. 
Mr Nader said approval of the 
agreement had been followed "by a 
rush of shutdowns and relocations." 
Mr Nader and others, especially 
labor officials, have noted that just 
the threat of a move to Mexico by a 
US company can have a dampening 
effect on wages here A smaller pay- 
check looks a lot better to an employ- 
ee when it's compared with no pay- 
check at all 

Meanwhile, an important issue that 
is noi getting enough attention is the 
danger that free-trade agreements 
will begin to erode some of the high 
health and safety standards devel- 
oped over several decades tn the 
United States. 

Nafta is just a warmup for the 
much broader revised General 
Agreement on Tariffs and Trade, a 
global effort to reduce trade barriers. 
Final GATT negotiations are sched- 
uled for completion in Geneva next 
month 

As the competition grows increas- 
ingly intense in the global market- 
place, the traditionally higher stand- 
ards of health and safety in the U.S., 
which add substantially to the cost of 
doing business, can be viewed as a 
handicap. 

And under international agree- 
ments like Nafta and GATT. other 
countries can (and will) complain 
that certain U.S. standards amount to 
barriers to free trade. Mr. Nader 
cites, as an example, auto safety 
standards. A foreign country that 
feels U.S. standards are too tough — 
even though they apply to all cars 
sold in the U.S. — could complain that 
it is being unfairly kept out of the 
American market. 



The mechanism for resolving such 
disputes is ominous. Under Nafta and 
GATT. international tribunals com- 
posed of trade officials will convene 
in secret to study such disputes and to 
issue binding rulings. If a safety 
standard in the U.S. were found to be 
an unfair trade barrier, the U.S. could 
either waive the standard or pay per- 
petual damages to the offended coun- 
try for the loss of sales in the U.S. 

"The new trade agreements are 
invading internal sovereignties, be- 
coming involved in things that are 
rone c: their bunness." said Mr. Na- 
der 

The elite may be sold on Nafta, but 
it deserves much closer scrutiny by 
everyone else. As for the Clinton Ad- 
ministration, it might find an easier 
route to free trade if it could only 
manage to do something real about 
jobf here at home □ 



129 



THE WALL STREET JOURNAL MONDAY, NOVEMBER 1. 1993 



/Clinton Urges 
Firms to Keep 
Jobs in U.S. 



Companies Balk at Request 
Not to Move to Mexico 
If Nafta Wins Approval 



By Asra Q. Nomani 

Staff Reporttr of The Wau. Street Journal 

WASHINGTON - The Clinton adminis- 
tration is urging U.S. companies to pledge 
not to move jobs to Mexico if the North 
American Free Trade Agreement passes, 
but corporate America is balking at the re- 
quest. 

Administration officials said they are 
seeking such commitments to dispel wide- 
spread worries that trade liberalization in 
Mexico will open the floodgates for U.S. 
companies attracted to the low wages 
there. Although officials privately express 
doubts about the success of this effort, such 
corporate assurances would be particu- 
larly timely as the highly charged Nafta 
debate winds down before the House's 
expected vote on the pact Nov. 17. 

William Daley, who is coordinating the 
White House campaign as Nafta "czar," 
said administration officials have raised 
the issue with a number of corporations 
and trade groups in meetings, briefings 
land phone calls. Those contacts began a 
;ebuple of months ago. officials said, and 
'the administration has revisited some of 
;tliese companies recently. "There has 
been some interest, but no commitments," 
Mr. Daley said in an interview. 

U.S. officials are secretive about which 
companies they have had the discussions 
with, but acknowledge the question has 
been broached with the Big Three auto 
makers, Chrysler Corp., General Motors 
Corp. and Ford Motor Co.. which Nafta 
opponents have targeted as prime candi- 
dates to relocate manufacturing jobs to 
Mexico. While making certain assurances 
that Nafta won't cost jobs, none of them 
have gone as far as administration offi- 
cials would like. 

"Companies have different reasons as 
to why they wouldn't consider" such 
pledges, said Mr. Daley. "Primarily, it's 
that businesses don't like to make blanket 
comments in a political realm. Companies 
that don't have any Interest In moving any- 
where still don't want to get In the 
middle of political debates." 



The administration is suggesting U.S. 
companies issue commitments that they 
would relocate operations in Mexico back 
to the U.S.. or that they would boost U.S. 
operations in response to increased ex- 
ports to Mexico. They've secured some 
statements. Some companies, such as Ace 
Hardware Corp.. Springs Industries Inc. 
and Tyco Laboratories Inc.. have said 
Nafta will prompt the creation of more jobs 
at their companies. Chrysler and Quaker 
Oats Co. have said Nafta wouldn't cost jobs 
at their U.S. operations. But the assur- 
ances aren't as plentiful and ironclad as 
many U.S. officials would prefer. 

At the request of certain lawmakers. 
U.S. companies have even been asked if 
they would sign a version of the Sullivan 
Principles, guidelines laid out years ago 
for U.S. companies doing business in 
South Africa. The guidelines, devised in , 
response to boycotts against companies 
that did business in South Africa, required , 
nondiscriminatory business practices. But i 
companies have balked at signing a new 
agreement, saying that the Sullivan Prin- 
ciples started as voluntary agreements 
and became mandatory, and they fear the 
same would happen with any Nafta-related > 
guidelines. 

Harry Freeman, a former American 
Express Co. executive and pro-Nafta trade 
consultant working with U.S. corporations' , 
lobbying effort, said the idea of making 
pledges has fallen fiat at Nafta strategy 
sessions he's participated in. because "it's 
foolish" from a corporate perspective. 

"It's full of hazards to make a politi- 
cally motivated announcement on a busi- 
ness matter which hasn't yet been de- 
cided.'' he said. "It gets you in trouble with 
your employees and your shareholders. 
You're asking for trouble." 

Jim Jontz. who heads the anti-Nafta 
lobbying group Citizens Trade Campaign, 
said! "I don't think the public would be- 
lieve it even if the companies did swear up 
and down that they wouldn't leave the 
U.S.'' Mr. Jontz. a former Indiana con- 
gressman, added. "The fact that they 
aren't willing to even publicly say that they 
aren't going to move plants to Mexico is 
even more fuel on the fire." 

Overall, corporate America hasn't got- 
ten rave reviews for its part in pushing for 
congressional support for Nafta, which has 
to be cleared by both the House and the 
Senate. The House vote is considered a 
tossup. and many lawmakers are pulled 
by labor's argument that Nafta will be a 
job-loser. 



In a speech Friday at the John F 
Kennedy Library in Boston. Mr. Clinton 
repeated a refrain (or companies to sup- 
port a broad program to retrain workers 
who lose their jobs as a result of Nafta. He 
argued that companies "had no right to 
ask the American people - any of them, 
even one of them - to sacrifice unless we 
are going to make a common invesi- 
ment." 

In a satellite "town meeting" today set 
up by the U.S. Chamber of Commerce. Mr. 
Clinton is readying to argue that opening 
the Mexican market is a crucial part of 
improving U.S. competitiveness in the 
global marketplace. His key point: that 
Japan and Europe will capture the Mexi- 
can market if the U.S. doesn't. 



130 



Expanding Trade and Creating American Jobs 
Remarks by Governor Bill Clinton 
North Carolina Slate University 
Raleigh, NC October 4, 1992 

Thank you. Thank you very much. Thank you. Thank you verymuch Thank you. 

You've brightened up a cloudy day. I want to say how delighted I am to be here with my good 
friend, Jim Hunt 

When I was elected Governor and took office in 1979, he was the leader of the Democratic Governors, 
and he befriended me and helped to educate me, and I can honestly say, in the years that have 
elapsed, I have served with about 150 governors of the United States, having now served longer than 
any other governor, and Jim Hunt is one of the very finest with whom I ever served in any state in 
America. 

He was our leader in education He was our leader in economic development He made me think of 
North Carolina as a state of the future, a state with a partnership between business, and government, 
and education; a state committed to competing in a global economy; a state committed to educating its 
people. 

The legacy of Terry Sanford and Jim Hunt inspired a whole generation of young people from all 
across the south, including me, and for that 1 will always be very, very grateful. 

I'd also like to say, I'm glad to be back here at North Carolina State, especially in this comfortable 
auditorium. 

A few years ago I came here to the Democratic Convention and we had it in the place where the Wolf 
Pack plays basketball. It was 90 degrees outside this is literally true. It was 100 degrees inside, and 
then we all got up to speak on a podium that had bright lights like this, but brighter and closer, so it 
was about 120 on the podium. Today, it is raining on us; that day I rained on the people in the 
crowd. 

Ladies and gentlemen, I came here to North Carolina today to talk about a difficult and important 
issue for our country. I wanted to come here because I think of North Carolina as a mixture of the 
best in America's economy, its traditional industries, and farms, and its modem hi-tech future. 

When I announced my candidacy for President a year and a day ago, I did it not just to challenge Mr. 
Bush, but to challenge the American people, and here I come today to talk about one of our greatest 
challenges-how we can compete and win in the global economy. 

Because I have been a governor during the entire decade of the 1980s, because I have served in the 
1970s, the 1980s, and the 1990s, I have literally been required to be obsessed with the competitive 
realities of my state and this nation, with what we do well and what we do poorly, with what policies 
work, and what policies don't But always at the core of all my concerns are the American people, the 
kind of people I've seen on these bus trips that Hillary and I, and Al and Tipper Gore, have taken. 
We're taking another one in Honda tomorrow. People who come out with hope in their heart and 
pain in their eyes; people who have worked hard and played by the rules. Some of them are winning, 
but too many of them are losing. 

The whole purpose of what one person once called the dismal science economics, is to enable us to 
make good decisions that will reward people who work hard and develop their God-given capacities. 



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I came here today to tell you why I support the North American Free Trade Agreement 

If it is done right, it will create jobs in the United States and in Mexico, and if it is done right and it is 
part of a larger economic strategy, we can raise our incomes and reverse the awful trend of now more 
than a decade in which most Americans are working harder for less money. 

If it is not done right, however, the blessings of the agreement are far less dear, and the burdens can 
be significant I'm convinced that I will do it right I am equally convinced mat Mr. Bush won't 

We live in a world that has been revolutionized almost beyond comprehension. We have seen in the 
last few years the Soviet Union disintegrate, the Berlin Wall, freedom fighters released from their 
prisons in Eastern Europe and South Africa, the Cold War end. That was the era in which I was born 
and in which Mr. Bush came of age, and over the last generation, less obviously but no less 
dramatically, we have seen unbelievable changes transforming the global economy, which have had 
their impact here at home. 

A little more than a generation ago, international trade and investment were a seemingly insignificant 
portion of our nation's income, but today our exports and imports of goods and services amount to 
about a quarter of our entire economy. 

A little more than a generation ago, American workers, consumers, and companies lived almost 
entirely within the American economy. Today, we live within the world economy, and foreign trade 
accounts for almost as high a proportion of our economic activity as it does in Japan and Western 
Europe. 

A little more than a generation ago, we were virtually unchallenged in the world market place, but 
today we are challenged as ever before not only by Japan and Western Europe, but by other countries 
as well. 

A little more than a generation ago, the world was a far simpler place We could support free trade 
and open markets and still maintain a high wage economy because we were the only economic 
super-power, and our capacity to control our destiny was largely totally within our own hands. 

Now, because money, and management and production are mobile and can cross national borders 
quickly, we face unprecedented competition from developing countries, as well as wealthy ones. 

You know mat in North Carolina and so do I. A textile worker in Carolina has to compete against a 
textile worker in Singapore perhaps to sell sweaters in Germany. 

If s also hard to tell who the players are. An American car may have more foreign parts in it than a 
foreign car that happens to be made in an American assembly plant 

This, in other words, is not a simple debate. The world is changing in complex ways. The choices 
before us are difficult and it is imperative that at least we understand what is going on, and that we 
have an honest and forthright discussion of all the forces that play. 

For a high wage country like ours, the blessings of more trade can be offset at least in part by the loss 
of income and jobs as more and more multi-national corporations take advantage of their ability to 
move money, management and production away from a high wage country to a low wage country. 

We can also lose incomes because those companies who stay at home can use the threat of moving to 
depress wages, as many do today. Other countries like Germany and Japan have, quite frankly, 



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managed this problem much better than we have. How have they done it? 

First of all, by maintaining a more highly-skilled work force not just among their university graduates, 
but up and down the line among all their workers. 

Secondly, by investing more in modem plant and equipment, and in research and development, and 
developing better systems of moving ideas from the laboratory to the market place, so that if they lose 
one kind of manufacturer job, there are always other kinds opening up. In contrast to what you often 
have here, where when people lose their manufacturing job, they look around until their 
unemployment runs out, and then eventually take a job making half what they used to make. 

Thirdly, these countries do a better job of controlling their external costs like health care and energy. 
The average German factory produces the same amount of output as the average American one for 
one-half the energy input and our country spends 30 percent more of our income on health care than 
any other nation with which we compete. 

Next, other countries do a better job of exporting more and of continuously increasing productivity by 
working together more closely, business and labor, government and education. But also lef s be 
frank-Germany and Japan have policies that are tougher in keeping high wage jobs at home, at least 
for the home market The Europeans have an absolute ban on foreign car sales that exceed 16 percent 
of the market now in Western Europe. The Japanese distribution system means that only 3 percent of 
the cars sold in Japan are not Japanese. We have an auto parts export surplus of $4 billion with every 
country in the world, but when you add Japan in, we have a $9 billion deficit 

For some time now-as you see, this is a very complicated thing, and for some time I have felt that 
one of the most difficult problems in modern politics and in, therefore, in this presidential election, is 
the simplistic and superficial labeling of complex issues. 

As network news sound bites have shrunk by one study- they're down to less than 9 seconds 
now-public discussions of important issues have gotten the short shrift On, perhaps, no other issue 
has the decline of discourse been more pronounced than on die issue of trade, an issue of great impact 
to you here in North Carolina in positive in negative and ways on fanners and textile workers, on 
furniture makers, on engineers, and scientists in the research triangle. 

Too much is at stake here to avoid the real issues, and, yet time and again, that is what we do. 

The issue here is not whether we should support free trade or open markets. Of course, we should. 
The real issue is whether or not we will have a national economic strategy to make sure we reap the 
benefits, and the answer today is, we don't 

Too many Republicans would say that if s a simple issue— free trade always equals economic growth. 
Well, it can, but only if we have a comprehensive national strategy to promote that kind of growth. 

Some Democrats would say that free trade today always equals exporting jobs and lowering wages. 
Well, it sure can if you don't have a comprehensive economic strategy to maintain a high wage, high 
growth economy. 

It is in that context that we have to look at this North American Free Trade Agreement Is it good for 
Americans? Will it help us to develop a high wage, high growth economy here at home? Or, by 
opening Mexico to more U.S. and foreign investment will it simply encourage more United States 
companies to abandon their workers and communities here and move to Mexico? Will it depress 
wages of those who are left here, and will they even have ironically less money to buy the products 



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that Mexico will send back to this country? 

Well, if you look at the experience of the mequiladora plants, those who have moved to Mexico right 
across the border, there is certainly cause for concern. We can see clearly there that labor standards 
have been regularly violated; that environmental standards are often ignored, and that many people 
who have those jobs live in conditions which are still pretty dismal not just by our standards, but 
theirs. 

So there is some reason to fear that there are people in this world and in our country who would take 
advantage of any provisions insuring more investment opportunities simply to look for lower wages 
without regard to the human impact of their decisions. 

Still, you must look at the other side of the coin. Changes in Mexico under President Salinas have 
ballooned our two-way trade with them and have eliminated the trade deficit we once had with 
Mexico. Thus, creating jobs here in America even as our investment policies have cost them. 

I can also say based on my own experience, that a good economic policy can grow manufacturing jobs 
even in tough global competition. 

In our state, thanks to highly productive workers and creative business leaders, good cooperation 
between the government and the private sector, good incentives and aggressive support for educating 
workers, promoting quality management and marketing more products, we have grown 
manufacturing jobs at 10 times the national average for several years now. You heard Governor Hunt 
say that we now rank first in the country in private sector job growth. There are many and complex 
reasons for this, but we did have a definite strategy that involved partnerships with a deliberate 
decision not to give up our manufacturing base. That is very important 

In the United States of America today, only about 165 percent of the work force is in manufacturing. 
In my state, if s 22 percent In this state, I think if s still about 28 percent the largest in the United 
States. 

I want to make it very clear-I am committed to maintaining a strong manufacturing base in this 
country. 

My grand daddy used to say that during the Depression, people were so poor, they took in one 
another's washing for a living. 

That would be the equivalent of an economy that was only a service economy where nobody in 
America ever made anything. 

The great economic powers in this world are the people who make things. We have 16.5 percent of 
our work force in manufacturing, Japan has 28 percent Germany has 32 percent We must do better 
and we can. 

I believe NAFTA can contribute to this effort, not undermine it as long as we move aggressively to 
address the serious omissions from the agreement 

I believe we have to do more for our own workers, to protect the environment on both sides of the 
border, both because ifs good for the environment and because if they don't do it it will further 
lower their cost of production, to promote prosperity on both sides of the border. 

If we do these things and, again, if we develop a serious economic policy at home, then NAFTA can 

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be a very good thing for the United States. 

We simply cannot go backwards when the rest of the world is going forward into a more integrated 
economy. We cannot go inward when our opportunities are so often outward. For all our history, 
America has moved ahead and reached out, colonizing a wilderness, exploring a continent, always 
seeking what President Kennedy called the New Frontier. 

And today we must forge ahead again. As president, I will seek to address the deficiencies of the 
North American Free Trade Agreement through supplemental agreements with the Canadians and the 
Mexican government and by taking several key steps here at home. I will not sign legislation 
implementing the North American Free Trade Agreement until we have reached additional 
agreements to protect America's vital interests. But I believe we can address these issues without 
renegotiating the basic agreement 

This agreement, however, is only one piece of a larger puzzle. Even the present negotiations recognize 
that, as there are other issues being discussed all along. We need not only to reduce trade barriers, 
but to prepare our entire work force not only to compete in the global economy, but to live with the 
changes in it and to make sure nobody gets left behind. 

I remain convinced that the North American Free Trade Agreement will generate jobs and growth on 
both sides of the border if and only if if s part of a broad-based strategy, and if and only if we address 
the issues still to be addressed. 

If we don't do those things, we can kill NAFTA, but we'll still lose jobs And thaf s the important 
point I want to make. I have been governor of a state that has seen jobs go on a fast track to Mexico 
and to other countries. If we do nothing on this agreement and we don't address the serious worker 
retraining and economic investment issues in this country and we don't change our economic policy, 
we will still lose jobs because money, production, management are mobile,and there are people, 
unfortunately, in this world who would rather move for cheap wages than stay and work for 
productivity. 

We have got to face the bigger issue. We cannot overload NAFTA and make it the symbol of either 
all our hopes, as Mr. Bush has done, or all our fears, as some of the opponents have done. We have 
got to see this as a part of a real big effort to rebuild the American economy from the ground up. 

This is not an abstract question. It has real consequences for real people. 

For more than a decade, our country has been led by yesterday's men, who were out of touch, out of 
ideas and out of step with the developments in the global economy, who refused to recognized not 
only new opportunities, but new challenges and new responsibilities. 

Americans have paid a terrible price for their policies. Trickle-down economics have given us a 
weakened economy, declining wages for more than two-thirds of our workers, longer work weeks, 
lost jobs, greater inequality, greater poverty, one in 10 Americans on food stamps today, a hundred 
thousand Americans a month losing their health insurance, and the real sense that we may be raising 
the first generation of Americans to do worse than their parents. 

Without a national economic strategy, this country has been allowed to drift Meanwhile, our 
competitors have organized themselves around clear national goals to save, promote and enhance high 
wage, high growth jobs. 

In a Clinton administration, we will approach trade and every other issue with a single-minded focus. 



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to do what is best for ordinary Americans who are willing to work hard to get ahead. 

But that focus must also recognize the new rules of the global economy. When Japan discovers a way 
just to make cars a little better, or when the European Community closes its markets to American 
pork, or when our president refuses to issue export credits and European farmers take away a Russian 
market that was meant to be for us, or when a country in South Asia or South America violates 
copyright standards for software, the impact is felt in factories and farms and families all across 
America. 

But when people line up in Paris to watch an American movie, when families around the world eat 
American food, when a jet made in Seattle lands or takes off from an airport in Seoul, American jobs 
and paychecks are more secure. 

Our prospects and our prosperity depend upon our ability to win in this kind of environment, an 
environment in which what we earn depends on what we can learn, in which Americans who only 
finish high school and have no further education and training face far grimmer futures man their 
parents, an America in which if we do not equal our competitors in research and development and 
our skill in bringing ideas into manufacturing jobs here at home, unless we have a conversion plan to 
take all the money by which we reduce defense and invest it in an American economy for the 21st 
century — in transportation, communication and environmental cleanup technologies, in biotechnology, 
in the new frontiers that will provide tens of thousands, indeed, hundreds of thousands of high wage 
jobs if we seize die opportunities, unless we do that, whatever we do on this trade agreement will not 
guarantee or undermine the future we are otherwise going to have. 

We've got to understand what the big rules are and start following them. Our competitors know it 
The Germans and the Japanese do more with education, from public school to apprenticeships to 
training in the work force, than we do The average German factory spends five times as much 
money retraining its workers as the average American employer on an annual basis. 

They do more on research and development than we do. They spend a higher percentage of their 
income. 

But when our companies do have well-trained workers and competitive products and services and 
high levels of cooperation and productivity, they do very well indeed. We still have some of the 
finest companies in the world, that dominate their marketplaces in spite of the fact that they live in a 
country which doesn't encourage investment in new plants over investment in new Maseratis or third 
or fourth homes. They do well in spite of the fact that they live in a country which won't control 
health care costs and in spite of the fact that they live in a country which doesn't guarantee that 
workers will always have the opportunity to have high, high, high levels of education and training. 

But no matter what we do in preparing our workers and investing money, we've still got to have 
markets for our products. As much as we export, the Germans export a far higher percentage per 
capita than we do. We need more markets. And today, regional economic blocs are emerging, very 
formally in Western Europe and less formally, but still surely in Asia, organized by Japan and 
Japanese investment 

It is too early to say whether the integration of Western Europe will be a plus or a minus for America. 
If they keep opening trade, well, thaf s good. 

We now have a $17 billion surplus with Europe. But they also limit car imports to 16 percent and 
they recently restricted imports of American agricultural products on the flimsiest of excuses. 



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So while we don't know what will happen with these other regional trading blocs, we know enough 
to know that we need stronger ties to our neighbors both for positive opportunities and to protect us 
in the event that other countries become more protectionist 

We can only do that with Canada, which is already at roughly our standard of living, and with 
Mexico, which is way below our standard of living, if we find a way to grow our economies together 
in ways that are good for both of us. 

So I advocate this treaty as a beginning of that process. I hope that one day well have a global 
agreement for the General Agreement on Tariffs and Trades which will be fairer to our country and 
which will open markets around the world. But in the meantime, we need to do more in our own 
region. 

If we can make this agreement work with Canada and Mexico, then we can reach down into the other 
market-oriented economies of Central and South America to expand even further. But these three 
economies together will give us, in terms of population, the largest trading market in the world today. 

It will provide more jobs through exports. It will challenge us to become more competitive. It will 
certainly help Mexico to develop, but still, that is also in our interest A wealthier Mexico will buy 
more American products; as incomes rise there, that will reduce pressure for immigration across the 
border into the United States, which depresses wages here 

President Salinas has taken some important steps. He's privatized corporations, he's reduced his debt, 
he's tamed inflation and he's brought down trade barriers. As I said, the unilateral initiative of the 
Mexicans has led to a huge increase in the products we sell there and the evaporation of the trade 
deficit. They also encouraged us to enter these negotiations. 

Now, what we have to do, I will say again, is to have a new kind of leadership to make this work. 
We have to have an overall trade policy that says to our trading partners, particularly our wealthy 
ones, if you want access to our market you've got to give us access to yours. 

When the president went to Japan, it was sort of sad. He took the auto company executives and 
pleaded with the Japanese to buy cars. But his United States trade representative had given him a 
report that said that if Japanese markets were as open as American markets, they would buy $10 
billion more products from us every year, everything from agriculture to auto parts to electronics, in 
ways that would create 300,000 high wage jobs in America. 

So we had to say trading blocs are not enough. We need fair treatment in other countries if we are 
giving mem fair treatment in ours. 

But let me back to this agreement Although it is unpopular with some people and organizations I 
admire and who represent the very Americans I am fighting so hard for in this election, I think we 
should go forward with it because it advances our interests, the interests of ordinary Americans, more 
than it undermines mem if we also do the other things needed to deal with the deficiencies in this 
agreement and if we have a good new economic policy. 

The agreement reduces and eventually eliminates trade barriers in place, especially in Mexico, against 
a number of major American exports. It opens up larger markets for our goods and services. It will 
phase out virtually all tariffs between the U.S. and Mexico over the next 15 years, with some of the 
most sensitive products being given the longest transitions. 

Yet as I said, there are critical issues which remain unaddressed, from workers' rights to farmers' 



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needs to environmental protection. Despite the promises he made to really address these in a 
forthright way, Mr. Bush has failed, most important, to provide adequate assistance to our workers, 
those most likely to be hurt by economic integration with Mexico. 

American farmers could also suffer without stronger safeguards for their interests. And the 
environmental provisions are still too weak. This agreement does nothing to reaffirm our right to 
insist that the Mexicans follow their own labor standards, now frequently viola ted -this is a very 
important issue-and not aggravating the wage differentials which already exist 

As we move toward free trade, we must always remember why we're doing it— to help the working 
men and women of America. We should not do things that are not in the interest of our people over 
the long run. 

There are apparel workers, fruit and vegetable farmers, electronic workers, auto workers who are at 
risk not only of short-term dislocation, but of permanent damage if this agreement is not strengthened 
and improved. Industries that have already been hard hit by the flow of jobs to Mexico will continue 
to be hurt unless we negotiate tougher measures to protect mem and to make ourselves more 
competitive 

The shortcomings in the agreement are really a reflection, however, of the shortcomings in the Bush 
economic policy as a whole, not just in his approach to trade with Mexico or to world trade, but in the 
whole approach to the economy and the environment 

This agreement underscores the core of the differences between me and Mr. Bush. From the national 
economic recession to the dislocations caused by defense cutbacks, his attitude has been that we 
should have trickle-down economics and let the market have its way, keep taxes lowest on the 
wealthiest Americans, then get out of the way. He seems to be saying, so what if some workers get 
hurt or some fanners get hurt or some environmental damage is done? So what? Sooner or later, it'll 
all come out in the wash. Well, a lot of Americans are being washed away by that economic 
philosophy. 

I want America to go forward with expanded trade with our neighbors. I also want an America that 
has a national economic strategy that makes sense. 

And I believe there are some things we need to do to make this agreement stronger, but I think they 
can be addressed without renegotiating the basic free trade agreement 

As president I will ensure adequate measures are taken however before Congress acts to implement 
the free trade agreement I don't want to give up all our leverage to help our workers and to make 
sure our environment is protected by basically ratifying the agreement through legislation. I think 
that we don't have to reopen the agreement, but we do have to insist that protection for our workers, 
for the environment proceed on parallel tracks. We should do it all at once. 

President Bush has many tools at his disposal to protect our interests in addition to the things that 
ought to be done to the agreement But he has failed to use them. As president, I will aggressively 
pursue the remedies available in our current trade laws and in the proposed agreement to protect our 
jobs, our businesses, our farmers and our environment from unfair practices. In addition, I think there 
are five unilateral steps we should take, and there are three supplemental agreements we should 
negotiate with Canada and Mexico to achieve an acceptable package. Here they are: First what we 
have to do; We've got to address the long neglected needs of our working people, both skilled and 
unskilled who are on the front lines of new economic conditions and who may be displaced. The 
most glaring omission in the president's package is its' lack of meaningful assistance to vulnerable 

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workers and community. 

For those who need training, we must provide it Mr. Bush's record on these issues is not a good one. 
In the last three budgets, he has proposed totally eliminating the training assistance that goes to 
people who's jobs are displaced by foreign competition 

In his 1993 budget he cut employment and training programs by $40 million. In a cynical election 
year ploy, his labor department proposed some more money for job training and other trade assistance 
to Michigan workers who've lost their jobs. It amounted to about $4 60 a worker. 

In our administration, the Clinton/Gore administration we won't play politics with the lives of 
working men and women. 

We will give you real programs to deal with the real problems. Trade adjustment assistance that 
includes training, health care benefits and income supports, and assistance to communities to create 
jobs. You can train people all you want, but if they don't have anything to do, it will be like being all 
dressed up with no place to go. 

While Mr. Bush has, in the 11th hour made a proposal more generous than anything he has said 
before, it is still way too little too late. I will do more, it will be better. The American working people 
will be proud of it It will ensure dignity and the opportunity to continue to be a productive member 
of the American work force. 

The second thing we have to do is move to protect our environment. 

The Bush administration on this score is so bad that Mr. Bush's own cabinet secretary sent a memo to 
all of his employees saying what a bad job the president had done at the earth summit And he's 
even stopped calling himself the environmental president 

If s not surprising that they did little to deal with this issue in the negotiations. Before we implement 
this, we have to be sure first, that there will be environmental clean up and infrastructure investments 
in our country sufficient to do what we have to do. 

The third thing we have to do is to make sure we do something for the farmers who are at risk here. 
I am convinced having read this agreement with some care that some of the farmers will do better 
under it than they fear that they will and that the losses in some sectors have been somewhat 
exaggerated. However, there will certainly be some dislocation. 

Assistance should be provided to fanners who are threatened. We can assist them first by strict 
application of American pesticide requirements to imported food. 

We should help some growers ship to alternative crops, and those who may lose out to competition 
should be just as eligible for transition assistance as workers in businesses and communities are 

Fourth, we ought to make sure mat NAFTA, the trade agreement, doesn't override the Democratic 
process. 

For example, in the provisions on the environment the current agreement contains no mechanism for 
public participation in defending challenges to American laws if we apply our environmental laws 
against Mexican products, or in bringing challenges to the practices of other parties. 

I think the new Congress should pass legislation to provide for public participation in crafting our 

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position and ongoing disputes, and to give citizens the right to challenge objectionable environmental 
practices by the Mexicans or the Canadians. 

Fifth, I think we have to make sure this agreement's provisions allowing foreign workers to cross our 
borders are properly implemented. We have to assure that certain professional workers aren't brought 
in here as strike breakers. The recent experience where Canadian workers were brought into the 
country to break our nurses' strike by American nurses is an example of this. That should never be 
repeated. 

As president, I have said repeatedly I would support a law to outlaw the use of permanent 
replacement workers, and I certainly will negotiate to stop the use of replacement workers from 
Canada and Mexico. 

I also think-I want to note that this agreement allows Mexican truckers to drive in the United States 
without having to satisfy all the U.S. safety and training standards. That troubles me, and I think that 
you have to say that we must do everything we can under the agreement, and mere are some things 
we can do, to assure there is adherence to U.S. standards through tough inspections. 

There are several areas now mat we have to negotiate supplemental agreements which I would want 
to present together with the agreement that's already been negotiated. Before implementing the 
agreement, we must establish an environmental protection commission with substantial powers and 
resources to prevent and clean up water pollution. The commission should also encourage the 
enforcement of the country's own environmental laws through education, training and commitment of 
resources, and provide a forum to hear complaints. 

Such a commission would have the power to provide remedies, including money damages and the 
legal power to stop pollution. As a last resort, a country could even be allowed to withdraw. 

If we don't have the power to enforce the laws that are on the books, what good is the agreement? 

We must have some assurances on this. This is a major economic as well as an environmental issue. 

Best of all, I'm going to ask Senator Gore to take charge of ensuring that an effective commission is 
established and that it does work to protect the environment 

The Bush administration has talked about setting up a commission, but ifs too little, too late. It won't 
even be up for final discussion until next year. By then, the incentives the other countries have to do 
anything meaningful will have evaporated if the agreement is already adopted. 

That is unacceptable. Al Gore and I will ensure that the environmental protection commission is up 
and running when the free trade agreement is up and running. 

A second commission with similar powers should be established for worker standards and safety. It 
too should have extensive powers to educate, train, develop minimum standards and have similar 
dispute resolution powers and remedies. We have got to do this. This is a big deal 

Perhaps the toughest issue of all is how to obtain better enforcement of laws already on the books on 
the environment and worker standards. Ifs interesting that the agreement negotiated by the Bush 
team goes a long way to do this in protecting intellectual property rights and the right to invest in 
Mexico, but is silent with respect to labor laws and the environment 

I want to remedy that I'm interested in the impact of this agreement on the rest of the people, not 

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just those investing in Mexico, but the rest of the people in this country and the rest of the people in 
their country 

So we need a supplemental agreement which would require each country to enforce its own 
environmental and worker standards. Each agreement should contain a wide variety of procedural 
safeguards and remedies that we take for granted here in our country, such as easy access to the 
courts, public hearings, the right to present evidence, streamlined procedures and effective remedies. I 
will negotiate an agreement among the three parties that permits citizens of each country to bring suit 
in their own courts when they believe their domestic environmental protections and worker standards 
aren't being enforced. 

Finally, 1 want to ask Congress to grant the authority to the president to continue negotiations on the 
impact of this treaty. What if we have a global agreement? How will that impact this? And most 
important what happens if there is an unexpected surge in imports in one sector or another that 
displaces huge numbers of people in this economy? 

We have in our present trade law, believe it or not-a lot of people don't know this-we have in our 
present trade law the capacity to protect our own workers if there is, quote, an unexpected surge in 
exports-or imports into our country in some sectors of the economy, where the displacement is too 
great for us to manage, too great for us to retrain, too great for us to put people to work in other 
sectors. 

That provision is contained for automobiles only in the North American Free Trade Agreement, and 
the remedy is weakened substantially. 

I believe we should negotiate a parallel agreement that deals with the fact that neither the Mexicans 
nor the Americans know what the full consequences of this agreement are going to be. You can't get 
anybody to agree on how many jobs we're going to lose or how many jobs we're going to gain out of 
this. And I think it's fair to say that we don't want to do anything that's unnecessarily crippling to 
them, and they shouldn't want to do anything that's unnecessarily crippling to us. 

So I will ask the Congress to give me extended authority to negotiate another agreement to deal with 
the ability of both countries to move in the event there is an unexpected and overwhelming surge in 
imports into either country which would dislocate a whole sector of the economy so quickly that 
there's nothing we could do about it to overcome the economic impact 

Now, I want to say one more time, none of this will make a difference unless we have a new 
economic policy. This administration has no strategy to create and preserve jobs in middle America, 
but they offer job training, low cost loans and technical assistance to companies that'll move to Central 
America. I know that most of you saw or now have heard the television show which documented the 
fact that the United States Agency for International Development has spent at least $289 million for 
programs to encourage American businesses to shut down here and move to Central America and the 
Caribbean. In fact your tax dollars paid for this advertisement And I quote— you paid for this: Rosa 
Martinez produces apparel for the U.S. markets on her sewing machine in FJ Salvador. You can hire 
her for 57 cents an hour. 

How do you feel about paying for that? You paid for low-interest loans to a plant in Tennessee to shut 
down in Tennessee, put 304 people on the street and move to Central America. But that fellow 
running that plant couldn't get the same low-interest loan to modernize plant and equipment in 
Tennessee to keep those people working. 

You paid for an employee of the United States government who was photographed in an interview 

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saying that the workers in the country he was working in were more reliable than the workers in 
Miami, Florida. You paid for that 

It is no wonder that the American working people are so frightened of having this administration 
implement this trade agreement 

We've got to stop using our own taxpayers' money to export their own jobs. And if s unbelievable to 
me that we have actually spent more money under the Bush administration last year to train workers 
in Central America than we spent to train people in middle America who had lost their jobs because 
of foreign competition. Now, that is their priorities. But let me say again, if s not enough just to stop 
what they are doing wrong. We have to do some new things right And let me reel them off quickly: 

We've got to change the tax system in this country. We should give people more incentives if they 
invest in new plants, new equipment, new small businesses, research and development housing, the 
kinds of things that put the American people to work, and we should remove from the tax code the 
incentives to shut plants down here and move them overseas. Thaf s what we should do. 

This is entirely consistent with what the other wealthy countries do. This is the only country-you 
look at Germany and Japan, look at their tax code-that would say we're not going to give you an 
investment tax credit to modernize your equipment and your plant but shut your plant down, move 
it overseas, well give you a tax deduction for shutting the plant down, we'll give you loss carried 
forward for the losses in the earlier years, keep your money down there and you'll never have to pay 
income tax on it in America. 

If s all backward. We need a tax system thaf s an investment job-oriented tax system that says, we 
want people to make money in America, but we want them to make it the old fashioned way-make 
millionaires by putting other Americans to work Thaf s very, very important 

I mentioned this once before and you clapped so I know you got it, but we've got to have a 
conversion strategy to do something with the defense money. The defense budget is going to be cut 
no matter who wins this election. 

But look what has happened. What has happened under the present Administration is all that money 
is going to the S&L bailout and the higher health care cost I want to put it into jobs for Americans. 
Ifs important 

We've got to ha ve- we have got to finally join the other advanced nations and have a national system 
to bring health costs in line with inflation and provide basic health care to all Americans; one that 
preserves the strengths of our system, but deals with the problems. 

We've got to bring energy usage into competitive lines with more efficiency and alternative uses of 
energy, more use of cheap American natural gas, renewable energy sources, and efficiency. 

If we could be as efficient in every factory and office building as our foreign competitors, it would 
free up billions of dollars to reinvest in this economy. 

If we could bring health care cost in line with inflation, it would save the average American family 
$1,200 a year and hundreds of billions of dollars for this economy, which could be reinvested for new 
jobs by the end of this decade hundreds of billions of dollars. 

And let me point out that that is why our campaign has been getting such broad based support The 
Teamsters endorsed the Clinton-Gore ticket the first Democratic ticket they had endorsed in two 

12 



142 



decades. In the hi-tech center of America, Silicon Valley, 21 computer and electronic executives 
endorsed our ticket two- thirds of them were Republican. 

In Chicago the other day, 400 business executives endorsed our campaign; a third of them were 
Republicans-because they know that whafs going on now is not working. 

On the health care issue, Mr Bush keeps dumping on me, but the Nurses Association endorsed our 
campaign; the first time they ever had. 

The American College of Physicians, 77,000 doctors issued a health care plan very similar to mine, and 
last week people who had been executives in both the Republican and Democratic Administrations 
said that Bush's health care plan would not control costs; that mine would save the average family 
nearly $1,200 a year by the year 2000 and that we would cover everybody, and his plan would still 
leave 27 million people uncovered. 

There is a reason why this kind of support is being generated for this ticket 

For all of its complexities, the debate over this treaty comes down to this: 

If s clear what the benefits of trade are. If s clear what the hazards of investment across national lines 
are, and the issue you have to face is who do you trust to protect our workers, our communities, and 
our environment? 

George Bush, whose Administration encourages American corporations to move to other countries 
with low wages and lax environmental laws, and even spends your tax money to finance it or Bill 
and At Gore who have a long record of fighting for good jobs and a healthy environment? 

Do you trust George Bush, who has amassed the worst economic record in 50 years, the first decline 
in manufacturing, two-thirds of the working people with their wages going down, 1 in 10 Americans 
on food stamps, quadrupled the debt in the last 12 years with our investment in the future going 
down, and no strategy for the future, or, a different kind of Democrats who believes we can have 
both, open markets and a strong domestic economy? 

In the end, whether the North American Free Trade Agreement is a good thing for America, is not a 
question of foreign policy. It is a question of domestic policy. 

If we are not strong at home, we will inevitably be weaker abroad. We have to build a new economy 
in which incomes and employment are rising and companies are growing; a society in which 
opportunity is expanding and hope comes alive again. 

And so I say to you, my fellow Americans, we have to have the courage to change, and a part of that 
change should involve a closer relationship with Mexico now under better leadership than ever in my 
lifetime. If we have the determination to reject failed policies and the old labels of the past if we have 
the vision to see and work toward a better tomorrow, men we need not fear the future. If we seize 
this day and shape this change, we can make our great country what it was meant to be. 

Thank you very much. 






13 



143 



NEWS RELEASE 



FOR IMMEDIATE RELEASE 

FOR MORE INFORMATION CONTACT: 

Ralph Nader 202-387-8030 



NADER SAYS NAFTA WILL UNDERMINE KEY 
ENVIRONMENTAL PROPOSALS IN VP AL GORE'S BOOK 



Consumer advocate Ralph Nader today called on Vice President Gore to explain how 
his support for the North American Free Trade Agreement (NAFTA) squares with proposals 
made in Gore's book. Earth in the Balance (Plume edition, 1993). 

Nader said that most of Gore's key US environmental and energy policy prescriptions 
(the only exception being Gore's proposed carbon tax) would, if enacted, be subject to 
challenge as "non-tanff trade barriers" under NAFTA. The challenges would be made before 
secret international NAFTA tribunals whose decisions are unreviewable in US courts. 
"By backing NAFTA, the Vice President is, in effect, surrendering the ability to effectively 
legislate and implement his own ideas," Nader said. 

In his concluding chapter, entitled "A Global Marshall Plan" (subsection: "The US 

Role") Gore proposes: 

—subsidies for "environmentally benign technologies -- such as low-energy light bulbs 
or high-mileage automobiles" (p. 349, proposal #1), which run afoul of trade rules 
incorporated into NAFTA against subsidies to particular industries. 

-imposition of a Virgin Materials Fee "at the point of manufacture or importation 
based on the quantity of nonrenewable, virgin materials built into the product" (p. 349, 
proposal #2), which would be subject to challenge under NAFTA because it is a tax 
on a production process. 

—"tax credits to subsidize the purchase of equipment necessary for recycling and for 
the efficient collection and use of recycled materials" (p. 349, proposal #2), which 
would also run counter to NAFTA if they were directed to particular industries, as 
they would almost certainly have to be. 



144 



-requiring the government to purchase recycled paper and environmentally sound 
goods (p. 350, proposal #3), an idea which Gore also emphasizes in his report on 
"Reinventing Government." but which runs counter to NAFTA rules on government 
procurement embodied in NAFTA Chapter 10, Article 1007. 

--"higher mileage requirements for all cars and trucks sold in the United States" (p. 
350, proposal #4), which would be subject to challenge under NAFTA Chapter 9, and 
indeed are now (in the mileage requirements' current form) being challenged under 
GATT. 

—utility rate reforms to "encourage full use of conservation and efficiency measures" 
(p. 350, proposal #6), which could also be defined as unfair barriers under NAFTA, 
Chapter 6, if it were, for example, argued that they served to make utilities lower their 
demand for Mexican oil. 

—subsidizing "the development of truly benign substitutes" for ozone destroying 
chemicals (p.351, proposal #8) would likewise be vulnerable under the NAFTA 
subsidy strictures, as would (under Article 104 of the NAFTA international 
environmental agreements) Gore's companion proposal to phase-out the ozone- 
destroyers faster than required under the Montreal protocol. 

Nader noted that while Gore's proposals might indeed have considerable merit, the US 
would face the prospect of fines and other sanctions if it tried to enact them under NAFTA. 

Nader added that Gore, in his book, calls for "incorporat(ing) standards of 
environmental responsibility in the laws and treaties dealing with international trade." and 
says that "weak and ineffectual enforcement of pollution control measures should also be 
included in the definition of unfair trading practices" (p. 343). Yet Gore now supports a 
NAFTA which will create pressure to roll-back environmental standards, and which 
specifically turns his recommendation on its head by limiting the pertinent definition of unfair 
trading practices to pollution control measures that are too strong (NAFTA, Chapter 9). 



### 



145 



REMARKS OF 

DR. BENJAMIN F. CHAVIS, JR. 

AT THE NAACP LEADERSHIP SEMINAR 

ON THE NORTH AMERICAN FREE TRADE AGREEMENT 



On behalf of the National Association for the Advancement of Colored People 
(NAACP), I would like to thank our presenters and panelists for their jibstantive and 
informative discussions on the North American Free Trade Agreement (NAFTA) and it# 
specific meaning for the African American community. 

This is part of an ongoing NAACP effort to examine and address maior policy 
initiatives that impact the African American community. We have, for examgle, a iigniEcant 
interest in the economic policies of our nation. Specifically, the NAACP is c racerned about 

Sow these policies directly affect the availability of needed jobs in our a mmunity. We 
ecideji to assess, therefore, whether African Americans stand to I gain or lose under 
fAFTA. ' 

It has been said that NAFTA represents one of the most importai t international 
trade initiatives of the second half of the 20th century. We have heari NAITA supporters 
state: that from a trade perspective, the agreement will facilitate the iategrafion of Canada, 
Mexico and the United States, thereby producing an integrated Aadini system for a 
population base of 365.5 million and a GDP of $6.2 trillion. This, of Jburse, has the 
potential to transform these three nations into the world's most powerful economic entity. 
There is also an expectation that productivity and living standards will increase in the tl ese 
nations under NAFTA 

We have also been informed, however, that African American worlers could dear 
the brunt of the downside of the trade agreement. The downside is the relocation of 
American industries to Mexico. African American workers are cancellated in urban 
communities and employed by flight-prone industries. These indi (tries — textile and 
apparel factories and auto assembly plants — currently have large cm rcentages of African 
American workers. These industries are in communities that already auffer high 
unemployment and are most vulnerable to the social upheaval that is brought about by 
higher unemployment 



* The loss of low-skill jobs to Mexico where labor costs aro presumed to be cheap is 

significant. The potential replacement of this loss by growth in higher-skilled and 

1 



146 



professional jobs under NAFTA may not fully meet the needs of African Americans who 
lack the educational training required for upward job mobility. 

It is important to note that the NAACP has not established a policy on NAFTA to 
date. We intend to use these focussed discussions to assist in the formulation of a policy 
on the trade agreement. I am confident that we have benefitted from these discussions 
concerning the economic, political and social implications of NAFTA We have heard today 
from those who fully support and those who fully oppose the agreement We have also 
heard recommendations for supporting the agreement conditioned upon the inclusion of 
certain provisions. These suggestions include the following: 



**fce 



^rt«M4 V increased support for the retraining of workers affected by plant closings. 



• increased support for community development banks to provide capital to 
communities where capital flight is rampant. i I A i 

• increased support for the social service systems in communities that will be negatively 
impacted by NAFTA. I 

■ ) tax and other credits to new or established enterprises that choose to remain in 
communities negatively impacted by NAFTA. 

For all of these reasons, the NAACP must and will develop a colerent policy portion 
on the free trade agreement The NAACP will integrate its existing, comprehensive policies 
on issues such as job creation, training, labor law enforcement eduAtionjenvironm|ntal 
justice, etc, into a policy on the overall impact of NAFTA on the eronomfc and political 
status of African Americans. \ ' 

In the final analysis, our participation in this significant debate represents new 
directions for the NAACP and our attempt to broaden the agenda of civil rights advocacy. 









147 




WASHINGTON BUREAU 

NATIONAL ASSOCIATION FOR THE ADVANCEMENT Of COLORED PEOPLE 

102S VERMONT AVENUE, N.W. • SUITE 730 • WASHINGTON, D.O. 20009 
(202)639-2269 FAX (202) A3&S836 




July 14. 1993 



< 



NAACP ANNOUNCES ITS OPPOSITION TO THE 
NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA) 



I 



The NAACP today announced its opposition to the final ratificatu n of the North 
American Free Trade Agreement (NAFTA) "in its present form*, and < riled upon the 
Clinton Administration to pursue economic strategies for the United States ' 'hich maximize 
the productivity of the nation's total potential workforce. The action v as taken ut an 
•.emergency resolution" adopted by delegates to the NAACP's 84th Annua Convenuw In 
Indianapolis, Indiana (resolution attached). 1 

I The NAACP's opposition to NAFTA is based largely on concern for he agreement's 

potentially negative impact on African American and other workers in the rejected loss to 
Mexico of industrial, agricultural and manufacturing jobs. Moreover, the continuing high 
level of unemployment in the African American community - which couk be exacerbated I 
by NAFTA-relatcd job loss - renders the accord problematic The abse ice of adequate • 
education, job training and minority business initiatives associated with NAFTA were also 
considerations in the NAACP's opposition to the agreement in its present form. 

The NAACP's resolution notes that NAFTA was negotiate* by the Bush 
Administration without the input of the NAACP nor with particular con ideraflon ct the 
agreements impact on African Americans. There is also concern tha so-called rside 
agreements" to NAFTA will not be responsive to the needs of the A rican American j 
community. The African American community's experience will) NAFTA emonstrates the 
importance of the NAACP's continued involvement in the issue of int national trade. 
Finally, the resolution calls for the NAACP's continuing co-operation ith the Clinton 
Administration in any subsequent discussions on issues affecting the ccoi >mic viability of 
the United States. ' 

The myth that *a rising economic tide lifts all boats' has long been iscreditedjwben 
applied to African Americans," said Wade Henderson, Director of the Wi ihington Bureau 
of the NAACP. "The NAACP supports economic growth for the United Si tcs, but NAFTA 
in its present form will further drain the economic base of the African America* 
community." 



Si t< 
fmn 



148 




WASHINGTON BUREAU ' 

NATIONAL ASSOCIATION FOR THE ADVANCEMENT OF COLOREO PEOPLE 

1026 VERMONT AVENUE. N.W. • SUITE 730 • WASHINGTON. D.O. 20006 
(202)638-2268 FAX (202) 63B-M36 




NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA) 



WHEREAS, the North American Free Trade Agreement (NAFTA) is of major 
concern to Americans in general and African Americans in particular; and 

WHERHAS, the National Association for the Advancement of Colored People 
(NAACP), in conjunction with other concerned organizations, has fully analyzed the 
proposed agreement; and 

WHEREAS, the United States is staggering under a $230 billion trite deficit which 
is partly to blame for the high level of African American unemployment «ul the wretched 
conditions currently affecting the inner cities of our nation; and 



it Ad 



i WHEREAS, NAFTA will have a negative impact on the 

revenues in this country, at precisely the time when entitlement benefits 
under great strain; ,and 



generation of public 
ind services are 



WHEREAS, the NAACP is concerned that the United States 
Mexico has already grown in many industries and the estimates of probable job 
NAFTA could reach as high as one million. State and local governm* nis 
revenues from businesses who relocate, and individuals who become j< bl 
regions that suffer the most intense job losses, the corresponding loss of 
be substantial; and 



t ade 



deficit* with 

loss doc to 

will lose tax 

ess. In those 

ax revenues will 



I 



WHEREAS, there is lUUc evidence to support to claim of NAFH 
free trade will create higher wage jobs for U.S. workers under the assump 
workas wiD take jobs at the lower end of the skills ladder; and 



'proponents that 
>n that Mexican. 



WHEREAS, the major issue devastating the nation today is Ac lack of jobs. 
NAFTA, as drafted, will result in the loss of industrial, agricultural, and mlmifacturlng jobs 
in the United States that are important to African Americans, as well as£o depress wages i 
in the United States, Mexico and Canada; and 

I WHEREAS, neither the NAACP nor the minority business commuiity has been full 
consulted or considered on NAFTA, For example, NAFTA was negotlted by the 
Administration without consideration or involvement from the NAACP. .Moreover, ther 



/ 



149 



Pi*o2 

are currently no proposals to provide technical flnanda), marketing or educational assistance 
to KDall businesses in genwal, or to minority businesses in particular, which are interested 
in trade and investment in Mexico; and 

WHEREAS, the NAACP is committed to protecting employment opportunities for 
African Americans, and supports programs that promote equal employment opportunity; and 

WHEREAS, the NAACP is equally committed to economic growth and the creation 

■i oP$us1ness opportunities for minority businesses; and 

WHEREAS, NAFTA is not primarify a free trade agreement Rather It is an 
investment agreement designed to 1 protect investments whifch U. S. consanies make in, 
Mexico; and 



ictvities of 



multi- 



WHEREAS, increased global economic integration through the a 
national and trans-national corporations is on-going; and 

WHEREAS, even without NAFTA the movement of capital and productive capacity 
from Canada and the United Slates will continue; and 

WHEREAS, an agreement between Canada, and the United States ±id Mexico, that 
creates a framework under which the rights of the citizens of all three countries are 
recognized and protected, should be negotiated; and 

WHEREAS, the NAACP would be supportive of the long-range development of a 
■North American C6mmon Market* between panada, the United States and Mexico; and 

I WHEREAS, the Congressional Black Caucus voted by a solid minority to oppose 

NAFTA in its present form. 

THEREFOR E BE IT RESOLVED, that the NAACF opposes adoplon of the North 
American Free Trade Agreement (NAFTA) in its present form because/it would further 
. drain the economic base of our community; and 

BE rr FURTHER RESOLVED, thai the NAACP joins a>l>« cab* for the 
development of actions and policies by the United States, Mexico and Cfnada that 

** Raise workers' income, improve labor standards, 
environmental standards, to the highest possible level; 

f* Use trade sanctions, including import restrictions, to er 
and the rights of workers in all three countries, so that competition 
be diminished; 



workplace and 



i these standards 
en workers oan 



150 



Ptf<>3 



Encourage t he pursuit of strategies that foster high incomes for workers and 
high productivity, education and training; 

** Recognize the contribution that the United States' government could make 
to improving the lives of Mexican workers by requiring U. S. banks to provide more 
extensive debt relief to Mexico and diminishing Mexico's need to earn U. S. dollars; 

** Promote cooperation between the people of the United States, Mexico, and 
Canada to build support for progressive economic and social policies and programs thai 
recognize the value of each and every human being in all three countries; and 

BE IT FURTHER RESOLVED, that we call upon the Clinton Adkninij|ralion to 
involve the NAACP in any subsequent trade negotiations or discussions thai maytuTcet the 
economic viability of the United States; and j 

BE II FURTHER RESOLVED, that the national NAACP, branches, state 
conferences and Regional Training Conferences begin an extensive education program and 
a series of public forums to discuss the details of NAFTA and the NAACP posfion; and 



BE IT FINALLY RESOLVED that the NAACP win work with the 
and Congress to address the concerns expressed in this resolution. 



Adopted fify 14, 1993, 1 tht Mft Annual Gamvndfn in IntianapoTa, Indian*. 



) 



.ecu tive Brt och 



TOTAL P. 08 



151 



As the nation's oldest and largest civil rights organization, the NAACP has had a 
longstanding interest in the economic and political status of African Americans. Economic 
and entrepreneurial development ii an important key to equality for African Americans. 
In that regard, the NAACP determined that it was Important to conduct a doser 
examination of the benefits and risks of NAFTA - the proposed trade agreement between 
the United States, Canada and Mexico - prior to its formal consideration by Congress later 
this year. 

Regrettably, under terms approved by Congress and President George Bush, the 

NAFTA agreement will be handled under special "fast track" procedures in Congress. Fast 

: Jtrack bars any substantive amendments to the agreement and puts a 90-day deadline on 

'xofSlderation (Goal passage or rejection) of NAFTA from the time the agreement is 

formally submitted to Congress. 

The NAACP's position on NAFTA is the result of careful deiiberatiA over a period 
(of several months. In an effort to provide a balanced examination of NAMA, on June 8, 
1993 the Washington Bureau of the NAACP convened a "leadership scmln|ur" for national 
board members and other interested persons which focused on important elements of the 
agreement Although NAFTA was the particular focus of the discussion, panelists 
emphasized the importance of economic growth for the future of African Americans. 

The seminar's keynote speaker, U.S. Trade Representative Mickey Kintor, addressed 
the terms of the final negotiations concerning NAFTA on issues such as me environment 
and labor standards. He was joined by Secretary of Commerce Ron Brown who discussed 
why NAFTA should be ratified and his department's efforts to promote NAfTA in African 
American, Hispanic American and Asian American communities. 

Other panelists who participated in the seminar included William lucy, Secretary- 
Treasurer of the American Federation of State, County and Municipal Employees [who 
discussed in detail the damage NAFTA would cause to some US. workers. Noted 
economist Lester Thurow of the Massachusetts Institute of Technology, alont with Professor 
Raul Hinqjosa-Ojeda of the University of California at Los Angeles, examined (be broader 
economic impact of the accord. James Robinson, former chairman of the American Express 
Company who was representing USA-NAFTA, urged the NAACP to support NAFTA 
because of the long-term advantages of the agreement in creating a new tariff-free market 
• to rival those In Europe and Asia. 



30 



152 



f Qtizen 



Buytr> Up • Congress Watch • CmucjI Mass • Health Research Group . Lmganon Group 
Ralph Nader Founder 

tks hattx uaittaamaa legislation amends food inspectiok 

STATUTES TO GIVE AGENCIES THE DISCRETION TO PERMIT IMPORTS FROM 
CANADA AND MEXICO THAT DO NOT MEET U.S. STANDARDS BUT MEET 
"EQUIVALENT" STANDARDS 111 

, ., : import* of Animals (cattle, sheep and swine) — permits 
I USDA to issue regulations excepting imports from Canada 
* and Mexico from 21 U.S. C. $ 104, which prohibited imports 

of animals diseased, infected with disease or exposed to 

such infection. S 361(b) 

Animal Inspections — permits USDA* to (Leslie regulations ' | 
waiving with respect to shipments from Mexico or Canada 
any requirements of 21 U.S.C- S 105, which required 
official inspections of animal imports to ascertain 
whether the animals were infected or exposed to 
contagious diseases. $ 361(c). 

Poultry Inspection — poultry imports from Mexico and 
Canada need not comply with U.S. standards set forth 
under 21 U.S.C. 5 466(d), which requires all poultry 
imports capable of use as human food to be subject to the 
same inspection, sanitary, and residue standards as 
domestic products. Instead, imports will be permitted if 
they are "subject to inspection, sanitary, quality, 
species verification and residue standards that are 
equivalent to United States standards" and "have Been 
processed in facilities and under conditions that meet 
standards that are equivalent to United States 
standards." 5 361(e). "Equivalent" is not defined. The 
statutory amendment reiterates NAFTA* s equivalence 
process, i.e., the other country supplies scientific- 
evidence that their standards are equivalent and the U.S. 
may determine that the standards or processes are not 
equivalent only if it has a scientific basis for doing 
so. 

Since the implementing legislation itself sets fo rth this 
standard, it would enable a poultry producer to cl allenge 
(as contrary to law under the APA) USDA's deter inadion 
that Mexican or Canadian inspection procedures are tot 
equivalent had an inadequate scientific basis. 

Meat Inspection — Amends 21 U.S.C. $ 620(e) permitting 
meat imports from foreign plants in Canada and Mexico if 
USDA certifies that they comply with U.S. standards OR 



2000 P Street NW • Washington DC. 20036 • (202)833-3000 



[ 



153 



coaply with equivalent requirements regarding inspection 
and building construction and other unspecified 
requirements. Previously, USDA had the authority to 
certify foreign plants only once it determined that they 
complied with requirements at least equal to all 
inspection and building construction and other 
requirements under this provision. S 361(f). 

As with the poultry inspection amendment, "equivalent" is 
not defined, and USDA can refuse to treat imports as 
equivalent only if it has a scientific basis for doing 
so, which could be challenged in U.S. courts by 
disgruntled meat exporters. 

Peanut Butter — provides that domestic peanuts must 
comply with Marketing Agreement No. 146, but imports (not 
just from Canada and Mexico) shall comply with eiwiar 
that marketing order or "sanitary measures that achieve 
at least the same level of sanitary protection."! S 
361(g). This amendment is designed to permit imported 
peanut butter that complies with different (but 
theoretically tougher) aflatoxin regulation. Again, the 
test for allowing in the imports that comply with a 
different standard is not well defined. 1 



154 






Buyers Up • CongreM Watch • Critical Man • Health Research Croup • Litigation Croup 
Ralph Nader. Founder 

EQUIVALENCE 

Under the concept of equivalence, NAFTA countries would be 
required to permit imports of food and other products that are 
shown to achieve its level of protection, in the case of food 
safety standards, or fulfills its legitimate objective, in the case 
of technical standards. Article 714(2), 906(4). The NAFTA 
countries are also required to accept the result of the other 
countries' conformity assessment procedures unless they conclude 
that the procedures fail to provide an assurance equivalent to 
domestic procedures of compliance with applicable standards. 
Article 906(6). ' 

The concept of "equivalency" has some precedent and experience 
under the U.S. -Canada Free Trade Agreement ("USCFTA") in the area 
of meat inspection. Prior to the USCFTA, the U.S. Department of 
Agriculture conducted random inspections of meat imported to the 
United States from Canada. Under the USCFTA, USDA conducted an 
equivalency study of Canadian meat inspection procedures. uSDA'i 
equivalency study did not require an identical inspection system, 
nor did it involve examinations of individual foreign plants. 
Instead, it employed a risk analysis to determine whether the 
Canadian system overall achieved the same results. Genera] 
Accounting Office, Food Safety | Quality; USDA Improves Inspectior 






Program for Canadian Meat, but Some Concerns Remain at 1-2, 4, 14 
(Aug. 1992) . 

The General Accounting Office bias criticized the equivalency 
determination for reaching certain conclusions without outside 
review and for overlooking important considerations. Thus, the 
study made professional judgments about the scientific and health 
implications of differences in the two systems, such as the U.S. 
testing of end products for listeria contamination, in contrast te 
the Canadian testing of workers and the work environment in which 
the food is -processed. Id. at 5, 18. Nonetheless, these 
professional assessments were not peer reviewed. Id. at 2, 7. The 
equivalency study also did not assess the Canadian system's control 
of or testing for drugs approved for use in Canada but not in the 
United States. Id.- at 3, 6, 20. Because USDA's testing program is 
driven by domestic concerns, border inspectors did not test for 
unapproved drugs in their reinspections of Canadian meat. id. at 

/ 

Pursuant to its equivalency determination, USDA ceased 
inspecting all Canadian meat imports in 1989, • andj instead 
instituted a cursory reinspection system designed not to ensure 
that the meat imports met U.S. standards, but rather to ensure that 



ndarc 

. DC 201 



2000 P Street NW • Waihinftcn. nd20036 • (202)833-3000 
■O"* 9 '""•0 on ■acyCNd *wv 



155 



Canada maintained its equivalent inspection system. id., at l. 
Only certain shipments vera inspected, usda would give Canadian 
plants advance notice vben a shipment was selected for inspection, 
and Canadian inspectors selected the samples to be inspected. Id. 
at 2. 

The General Accounting Office criticized the relaxed border 
inspections, contending that USDA documentation did not support the 
conclusion that the Canadian meat inspection was equivalent to the 
U.S. system. Id., at 2. Meat inspectors complained that Canadian 
producers were taking advantage of the cursory reinspections and 
shipping contaminated meat. Under this system, the rejection rate 
' 'ppped by half, even though the Canadian rejection rate for U.S. 
It doubled over the same time period. Id. at 3, 25. 



The concept of equivalency fueled a formal trade challenge 
under the USCFTA to Puerto Rico's restrictions of Canadian export* 
of ultra-high temperature milk under tits newly adopted pasteurizA 
milk ordinance. That ordinance is preventative in nature, design* 
to ensure milk industry compliance with safe sanitation standardk 
and practices. It relies heavily on inspections and cert if icatior b 
by state and local agencies. The Canadian UHT milk did not comply 
with the Puerto Rican standards, nor had it joined the inspecticn 
and certification system used by Puerto Rico and throughout tt e 
United states. However, Canada argued that its standards weie 
substantially equivalent, which the USCFTA defines as "having tie 
same effect.". The panel convened under the USCFTA concluded that 
Puerto Rico nullified and impaired Canada's expectations under tt e 
USCFTA by closing its market to UHT during the course < f 
negotiations on equivalency, and it recommended the expeditioi s 
completion of an equivalency study. In re Puerto Rico Reerulatioi s. 



on the Import. Distribution and Sale of UHT Milk from Quebec 
5. 60-. 61 (June 3, 1993). 



? 



Equivalency is an inexact concept that can mean different 
things to different decisionmakers. As the Canadian mart 
inspection example illustrates, controversial public heallh 
determinations underlie equivalency determinations, yet NAFTA, 11 :• 
the USCFTA, entitles countries to such a determination, even on i in 
expeditious basis, without requiring the assessment of . eve y 
potentially significant public health issue or every inspecti 
process. Applying the concept of equivalency to performance 
standards and good manufacturing practice requirements will presi 
an array of difficult problems, as the listeria example in m< 
inspection illustrates. 



Equivalency determinations made under NAFTA may have seriofis 
health implications. Thus, 6ince 1982, when the number of ste 
imported from Mexico has increased nearly fourfold , the incidence 
of tuberculosis has increased substantially, with most iases th it 
have been traced by USDA being linked to Mexican cattle. Cn 
addition, from 1984 through 1988, imports of meat from Mfcxico wa re 
prohibited because Mexican plants had not been cert if led fcy USDA is 
meeting U.S. standards. Since 1989, USDA has oerttied s 



some 



156 



Mexican plants, and meat exports to the U.S. have grown. Given 
past problems with Mexican aeat import*, an equivalency 
determination would raise serious health issues. 

In addition, NAFTA would require the U.S. to make Mexico and 
Canada subject to the same inspection procedures that are applied 
to U.S. and other NAFTA countries' foods. This is so even if there 
has been a legitimate reason for treating the country differently. 
For example, special inspection procedures have been established 
more Mexican produce because it has higher DDT residues than 
domestic produce and than permitted under U.S. law. Under NAFTA, 
the U.S. must, conduct inspection procedures in no less favorable 
manner than for like goods of the U.S. or other countries. Article 
717(1) (a). The U.S. may need to discontinue these inspections. 



157 



Citizen 



Buyers Up • Congress Watch • Critical Mass • Health Research Group • Litigation Group 
Ralph Nader Founder 

PRIMER ON NAFTA' S STANDARDS PROVISIONS 

I. THE MEANS USED TO ACHIEVE A LEGITIMATE GOAL 

Two means tests are creeping into GATT trade disputes: (1) a 
requirement that the country use the alternative means that are the 
least restrictive to trade or the least inconsistent with the trade 
agreement; and (2) an analysis that views an otherwise legitimate 
measure as suspect simply because it has a disproportionate impact 
on imports, even if it is not discriminatory on its face, or even 
in its purpose. 

It's important to recognize that these tests are not set in 
stone under GATT, particularly as applied to health and 
environmental measures: (1) the Tuna-Dolphin panel report has not 
been adopted by the GATT Council; (2) the same issues are being 
revisited in the second Tuna-Dolphin challenge with the U.S. 
arguing strenuously against the first decision; (3) the one adopted 
panel report on a health or environmental matter accepted the least 
GATT inconsistent test but rejected the notion that a facially 
nondiscriminatory measure that had a disproportionate impact on 
imports would be inconsistent with GATT on the facts in that case; 
and (4) GATT panel reports are not binding precedent in the way 
that U.S. court decisions are. If these tests are written into 
NAFTA, they will gain the political legitimacy that they currently 
lack. 

Several NAFTA provisions invite scrutiny of the means used by 
a country (or state) to achieve its legitimate objectives. 

A. FOOD SAFETY STANDARDS 

1. Unnecessary Obstacles 

Each Party shall ensure that any sanitary or 
phytosanitary measure that it adopts, maintains or 
applies is applied only to the extent necessary to 
achieve its appropriate level of protection, taking into 
account technical and economic feasibility. Article 
712(5). 

The "only to the extent necessary" language is far clearer on 
requiring least restrictive trade alternatives than any language 
under which that test has previously been applied. When coupled 
with the "taking into account technical and economic feasibility" 
language, this test is devastating. 



2000 P Street NW . Washington. DC 20036 • (202)833-3000 

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158 



Although the Ambassador Kantor has tried to give the 
impression that a food safety measure is insulated from attack, 
that reading is not compelled by the plain language. 

EXAMPLES: 

The Delaney Clause establishes a O-risk (level of 
protection) for carcinogenic pesticides that concentrate 
in processed foods. EPA has established some cautionary 
policies that expand the risk to some raw commodities. 
Thus, because EPA does not know which apple will be used 
to make applesauce, it establishes a tolerance for 
residues of the carcinogenic pesticide on the apple as 
well as in the applesauce. Industry has petitioned EPA 
to revoke this policy. A trade challenge could be 
mounted to it because the level of protection is risk 
from carcinogenic pesticides that concentrate in 
processed foods (a higher risk is permitted from 
carcinogens in raw commodities) . The coordination 
policy, as it is known, is a means to achieve that end. 
A challenger could argue, as industry has, that this 
policy is not necessary because FDA could simply monitor 
the processed foods for the residues instead. 

A ban on fish with lead levels that are safe for everyone 
except pregnant women and children might be challenged on 
the ground that warnings would suffice. The same type of 
challenge could be made to a ban on dyes or genetically 
altered produce that is safe for consumption except for 
vulnerable subpopulations. 

Technology forcing regulations might be vulnerable. For 
example, EPA entered into a settlement several years ago 
that provided that carbofuran could not be used on rice 
three years down the road, even though no substitutes 
were then available. Or, an agency might ban the use of 
lead solder in food cans five years from now in order to 
force industry to come up with alternatives. The 
technical and economic feasibility caveat in this 
provision might make such a technology forcing measure 
vulnerable to challenge. 

Federal statutes and regulations establish the level of 
protection from exposure to pesticide residues on food. 
EPA establishes tolerances for X pesticide on broccoli 
(or bans the residues altogether) and prohibits an import 
that has greater residues. A country may challenge the 
import ban and contend that the tolerance level and bar 
of the import are not necessary to achieve the level of 
protection because the residue will diminish over the 
time that it is transported, with routine washing, or 
with cooking, or people do not eat as much broccoli as 
EPA assumed in setting the tolerance. 



159 



The Circle of Poisons Prevention Act would ban the export 
of certain hazardous pesticides in part to prevent them 
from being used on foods exported back to the U.S. A 
challenger could argue that the export ban is not 
necessary because permitting the export but prohibiting 
and monitoring for the residues would achieve the level 
of protection. 

Labeling requirements: A country challenges a labeling 
requirement for foods containing a known carcinogen on 
the ground that there is no evidence of a cancer risk 
from consuming a particular food. 

If Congress or the FDA decides that mandatory nutritional 
labeling is necessary to provide consumers information 
about potentially harmful additives, such as salt, MSG, 
nitrites, or sulfites, a trade panel might decide that 
voluntary labeling would suffice or that not all foods 
need to be covered by mandatory requirements. 

2. Disguised Restrictions 

No Party may adopt, maintain or apply any sanitary or 
phytosanitary measure with a view to, or with the effect 
of, creating a disguised restriction on trade between the 
Parties. Article 712(6) . 

This language may allow challenges to measures that are not 
facially discriminatory but have disproportionate effects on 
imports. If so, all sorts of measures could be challenged: 
Pesticide tolerances or bans on mangoes, bananas, or other foods 
that come primarily from other countries; the failure to permit 
residues of a pesticide used in other countries but not in the 
U.S.; prohibitions on food additives from other countries. 

In two GATT disputes, the phrase "applied in a manner which 
would constitute a disguised restriction on trade" has been 
construed more narrowly to require that a trade restriction be a 
matter of public record or process (published in the Federal 
Register or resulting from an administrative process) and applied 
as a trade measure ( e.g. . enforced at the border) . This 
construction, however, has been criticized. 

Given the criticisms of the two GATT panel decisions, and the 
words "with the effect of" prefacing "creating a disguised 
restriction on trade," this language may incorporate a 
discriminatory effects test. Even under a narrower construction, 
FDA action levels may be vulnerable. As may a ban. on listeria in 
cheese, which is only imported, while other listeria is not banned. 

3. Non-discriminatorv Treatment 

Each Party shall ensure that a sanitary or phytosanitary 
measure that it adopts, maintains or applies does not 



160 



arbitrarily or unjustifiably discriminate between its 
goods and like goods of another Party, or between goods 
of another Party and like goods of any other country, 
where identical or similar conditions prevail. Article 
712(4) . 

A measure that is on the books and applicable to all products 
or producers within its terms is not "arbitrary" under GATT 
jurisprudence. 

"Unjustifiable" has not been construed by GATT" panels, and 
thus it may be more problematic. The term is value-laden and calls 
for a subjective judgment of whether something is justified. It 
may be read to require use of the least trade restrictive 
alternative. 

B. TECHNICAL STANDARDS (any nonfood measure) to safety, 
protection of human, animal or plant life or health, the 
environmental protection, or consumer protection) . 

1. Unnecessary Obstacles 

No Party may prepare, adopt, maintain or apply any 
standards-related measures with a view to or with the 
effect of creating an unnecessary obstacle to trade 
between the Parties. An unnecessary obstacle to trade 
shall not be deemed to be created where: 

(a) the demonstrable purpose of the measure is to 
achieve a legitimate objective; and 

(b) the measure does not operate to exclude goods of 
another Party that meet that legitimate objective. 

The second sentence limits the reach of this provision to 
those situations in which a good is barred explicitly or in effect. 

EXAMPLES : 

OVERINCLUSIVENESS CHALLENGES: 

In a court challenge to the Environmental Protection 
Agency's phaseout of asbestos, the Government of Canada 
filed an amicus brief arguing that the asbestos phaseout 
violated both GATT and the U.S. -Canada Free Trade 
Agreement. In particular, the amicus brief contended 
that a less restrictive alternative would involve banning 
the most harmful type of asbestos, while still permitting 
the use with restrictions of less harmful types of 
asbestos, which are produced principally in Canada. The 
court decided the case on domestic law grounds without 
reaching the trade issues. Corrosion Proof Fittings v. 
EPA . 947 F.2d 1201 (5th Cir, 1991). Under NAFTA, 
however, Canada might be able to mount such a trade 
challenge, if it could show that banning imports of the 



161 



Canadian type of asbestos is not necessary to achieve the 
legitimate public health objective of the phaseout. 

If (as it once did) , the Department of Transportation 
required trucks to use antilock brakes, a challenger 
might argue that anti-jack knife devices would have the 
same effect, even though it takes longer to stop the 
truck with them. 

If the U.S. decided to ban asbestos-lined brakes because 
U.S. workers are exposed to the asbestos when they 
install or repair the brakes, another country could argue 
that the ban is unnecessary because the workers could use 
protective clothing and ventilation to limit the risk. 

Congress is considering banning balls with a greater than 
1.75 inch diameter for small children. CPSC decided it 
did not have enough evidence of a problem presented by 
balls that are larger than the current size limit for 
toys. Only one child was known to be injured from such 
a ball. If the measure passes, a challenger could argue 
that it is unnecessary or that hard plastic or wood balls 
should not be subject to it. 

OSHA is considering phasing out cadmium batteries because 
the cadmium leaches into ground water in landfills. Most 
substitutes also contain heavy metals that would present 
similar problems. A challenger might argue that a ban on 
cadmium batteries does not meet the objective. 

If Material Safety Data Sheets are harmonized and another 
country uses a harmonized MSDS that falls short of our 
requirements, a challenge could be brought to the U.S. 
requirement where it bars import of the product. 

RECYCLING MEASURES: 

The European Court of Justice invalidated a component of 
a Danish recycling scheme requiring the use of reusable 
containers that could be handled by facilities in 
Denmark. In order for the system to work, Denmark 
argued, and the court agreed, only 30 types of bottles 
could be used. For this reason, Denmark required the use 
of approved bottles. It had never disapproved the use of 
a type of container, and it had not yet approved the 
maximum number that its system could handle. 
Nonetheless, the court struck down the requirement 
because it had a heavier burden on other countries. In 
re Disposable Beer Cans: Commission v. Denmark . 1988 
E.C.R. 4607, 1 C.M.L.R. 619 (1989). 

Under the same logic, Germany's new recycling law, which 
requires manufacturers to ensure that set percentages of 
their packaging materials are recycled or reused, could 
be vulnerable, if it operated to exclude goods. 



162 



Requiring manufacturers to take responsibility for waste 
from their products after sale in another country would 
be more burdensome for foreign manufacturers than 
domestic ones, and might lead a manufacturer to cease 
exporting goods to that country. 

Ontario has a taxing system that taxes recyclable beer 
containers at a higher rate than reusable ones. The U.S. 
aluminum can and beer industries have complained that it 
discriminates against U.S. beer, which is sold largely in 
cans, as compared with Canadian beer, which is sold 
largely in bottles, perhaps because Canada has already 
made the transition to bottles. If the tax kept out U.S. 
beer, or if Ontario required all beer to be sold in 
reusable bottles, the measure would be vulnerable. 

2. International Environmental Agreements 

NAFTA specifies that obligations under certain international 
environmental agreements prevail in the event of a conflict with 
NAFTA. However, it requires NAFTA countries to use the means of 
complying with such obligations that are the least inconsistent 
with other NAFTA provisions, where the country has a choice between 
equally effective and reasonably available means of complying with 
the Agreement. Article 104(1). The United States has gone beyond 
its mandatory obligations under both the Montreal Protocol on 
Substances that Deplete the Ozone Layer and the Convention on 
International Trade in Endangered Species of Wild Fauna and Flora 
in ways that severely restrict trade (by banning use of certain 
chemicals and trade in certain species or products) . The means 
used by the United States may be vulnerable under the least 
inconsistent with NAFTA test, particularly since the U.S. actions 
are not compelled by the Agreements but are in furtherance of their 
goals. Because both Agreements and the U.S. measures are designed 
to protect the environment or species outside U.S. territory, and 
NAFTA is silent as to whether technical standards may promote 
extraterritorial goals (SiP standards may not) , the international 
environmental agreement section of NAFTA is key for these 
provisions. 

3. Process Regulation . 

NAFTA 's S & P and technical standards provisions apply to the 
regulation of processes or production methods only to the extent 
they are related to the characteristics of a good. Thus, the 
process of producing milk may be regulated to prevent contamination 
of the milk. Meat imports can be barred because the slaughtering 
process violates sanitation standards, but not because it is 
inhumane to the animals. Nor can fish imports be barred because 
the fish were caught with large drift nets. 

If GATT precludes prohibitions on an import because of the way 
it is processed, as the tuna-dolphin decision suggested, NAFTA 
would simply provide another basis for the same result. However, 



163 



if such process regulations cone within the GATT exceptions, as the 
U.S. is arguing in the second tuna-dolphin dispute proceeding, 
NAFTA would provide new grounds for setting aside such food safety 
measures, but not technical standards because the GATT exceptions 
are incorporated into NAFTA for them. For food measures designed 
to protect human or animal life and health, such as humane animal 
treatment or slaughter requirements, NAFTA would lock in the 
restrictive rules. 

The same is true with respect to extraterritorial regulation. 
NAFTA' s food safety chapter does not allow regulation to protect 
health or life outside a country's territory. The technical 
standards chapter is silent and it incorporates the GATT 
exceptions. If GATT prohibits extraterritorial regulation, then 
NAFTA is in accord with GATT. If GATT permits such regulation or 
leaves the issue open, NAFTA resolves it against extraterritorial 
regulation for food safety. 



164 



XI. EQUIVALENCE 

Under the concept of equivalence, NAFTA countries vould be 
required to permit imports of food and other products that are 
shown to achieve its level of protection, in the case of food 
safety standards, or fulfills its legitimate objective, in the case 
of technical standards. Article 714(2), 906(4). The NAFTA 
countries are also required to accept the result of the other 
countries' conformity assessment procedures unless they conclude 
that the procedures fail to provide an assurance equivalent to 
domestic procedures of compliance with applicable standards. 
Article 906(6) . 

The concept of "equivalency" has some precedent and experience 
under the U.S. -Canada Free Trade Agreement ("USCFTA") in the area 
of meat inspection. Prior to the USCFTA, the U.S. Department of 
Agriculture conducted random inspections of meat imported to the 
United States from Canada. Under the USCFTA, USDA conducted an 
equivalency study of Canadian meat inspection procedures. USDA's 
equivalency study did not require an identical inspection system, 
nor did it involve examinations of individual foreign plants. 
Instead, it employed a risk analysis to determine whether the 
Canadian system overall achieved the same results. General 
Accounting Office, Food Safety & Quality: USDA Improves Inspection 
Program for Canadian Meat, but Some Concerns Remain at 1-2, 4, 14 
(Aug. 1992). 

The General Accounting Office has criticized the equivalency 
determination for reaching certain conclusions without outside 
review and for overlooking important considerations. Thus, the 
study made professional judgments about the scientific and health 
implications of differences in the two systems, such as the U.S. 
testing of end products for listeria contamination, in contrast to 
the Canadian testing of workers and the work environment in which 
the food is processed. Id. at 5, 18. Nonetheless, these 
professional assessments were not peer reviewed, id . at 2, 7. The 
equivalency study also did not assess the Canadian system's control 
of or testing for drugs approved for use in Canada but not in the 
United States. Id. at 3, 6, 20. Because USDA's testing program is 
driven by domestic concerns, border inspectors did not test for 
unapproved drugs in their reinspections of Canadian meat. Id. at 
6. 

Pursuant to its equivalency determination, USDA ceased 
inspecting all Canadian meat imports in 1989, and instead 
instituted a cursory reinspection system designed not to ensure 
that the meat imports met U.S. standards, but rather to ensure that 
Canada maintained its equivalent inspection system. Id . at 1. 
Only certain shipments were inspected, USDA would give Canadian 
plants advance notice when a shipment was selected for inspection, 
and Canadian inspectors selected the samples to be inspected. Id . 
at 2. 

The General Accounting Office criticized the relaxed border 



165 



inspections, contending that USDA documentation did not support the 
conclusion that the Canadian meat inspection was equivalent to the 
U.S. system. Id . at 2. Meat inspectors complained that Canadian 
producers were taking advantage of the cursory reinspections and 
shipping contaminated meat. Under this system, the rejection rate 
dropped by half, even though the Canadian rejection rate for U.S. 
meat doubled over the same time period. id., at 3, 25. 

The concept of equivalency fueled a formal trade challenge 
under the USCFTA to Puerto Rico's restrictions of Canadian exports 
of ultra-high temperature milk under its newly adopted pasteurized 
milk ordinance. That ordinance is preventative in nature, designed 
to ensure milk industry compliance with safe sanitation standards 
and practices. It relies heavily on inspections and certifications 
by state and local agencies. The Canadian UHT milk did not comply 
with the Puerto Rican standards, nor had it joined the inspection 
and certification system used by Puerto Rico and throughout the 
United States. However, Canada argued that its standards were 
substantially equivalent, which the USCFTA defines as "having the 
same effect." The panel convened under the USCFTA concluded that 
Puerto Rico nullified and impaired Canada's expectations under the 
USCFTA by closing its market to UHT during the course of 
negotiations on equivalency, and it recommended the expeditious 
completion of an equivalency study. In re Puerto Rico Regulations 
on the Import. Distribution and Sale of UHT Milk from Quebec 1 
5. 60-. 61 (June 3, 1993). 

Equivalency is an inexact concept that can mean different 
things to different decisionmakers. As the Canadian meat 
inspection example illustrates, controversial public health 
determinations underlie equivalency determinations, yet NAFTA, like 
the USCFTA, entitles countries to such a determination, even on an 
expeditious basis, without requiring the assessment of every 
potentially significant public health issue or every inspection 
process. Applying the concept of equivalency to performance 
standards and good manufacturing practice requirements will present 
an array of difficult problems, as the listeria example in meat 
inspection illustrates. 

Equivalency determinations made under NAFTA may have serious 
health implications. Thus, since 1982, when the number of steers 
imported from Mexico has increased nearly fourfold, the incidence 
of tuberculosis has increased substantially, with most cases that 
have been traced by USDA being linked to Mexican cattle. In 
addition, from 1984 through 1988, imports of meat from Mexico were 
prohibited because Mexican plants had not been certified by USDA as 
meeting U.S. standards. Since 1989, USDA has certified some 
Mexican plants, and meat exports to the U.S. have grown. Given 
past problems with Mexican meat imports, an equivalency 
determination would raise serious health issues. 

In addition, NAFTA would require the U.S. to make Mexico and 
Canada subject to the same inspection procedures that are applied 
to U.S. and other NAFTA countries' foods. This is so even if there 



166 



has been a legitimate reason for treating the country differently. 
For example, special inspection procedures have been established 
■ore Mexican produce because it has higher DDT residues than 
domestic produce and than permitted under U.S. law. Under NAFTA, 
the U.S. must conduct inspection procedures in no less favorable 
manner than for like goods of the U.S. or other countries. Article 
717(1) (a). The U.S. may need to discontinue these inspections. 



167 



III. THE HARMONIZATION PROCESS 

NAFTA is part of a recent trend toward harmonization of 
domestic health and environmental standards. Both NAFTA and the 
Uruguay Round would require countries to use international 
standards as a basis for their own, and it would create a 
presumption that certain international food safety and technical 
standards do not create unfair trade barriers. Articles 713(2); 
905(1). NAFTA goes further and requires the countries to make 
their standards "compatible" to the greatest extent practicable, 
and to make their food safety standards "equivalent" or where 
appropriate identical. Articles 906(2), 713(1), 714. 

NAFTA establishes processes for harmonizing standards among 
the three countries. Representatives of each country will 
participate in committees to establish harmonized standards. These 
committees need not involve the public in their proceedings. Thus, 
there is no open meeting requirement, no right of access to their 
records, no requirement that the public be afforded an opportunity 
to comment on proposed standards. In this respect, these 
committees may diverge sharply from domestic standard-setting 
processes in Congress or in federal agencies under the 
Administrative Procedure Act. 

Nor are states guaranteed a participatory role, even though 
their standards may be adversely affected by the harmonization 
process. Once the three countries have agreed on harmonized 
standards, they must work to ensure that each country adopts that 
standard as its own, or at a minimum permits imports that comply 
with the standard. A state standard that provides greater 
protection than the harmonized one will be suspect and vulnerable 
to challenge as an unfair trade barrier on nullification and 
impairment grounds. 



be: 



168 



IV. BA8I8 FOR FOOD SAFETY STANDARDS 
Food safety measures must meet three other tests. They must 

(a) based on scientific principles, taking into account 
relevant factors, including, where appropriate, different 
geographic conditions; 

(b) not maintained where there is no longer a scientific 
basis for it; and 

(c) based on a risk assessment, as appropriate to the 
circumstances . 

Article 712(3) . 

"Scientific basis" is defined as "a reason based on data or 
information derived using scientific methods." 

"Risk assessment" is defined as "an evaluation of . . . the 
potential for adverse effects on human or animal life or health 
arising from the presence of an additive, contaminant, toxin or 
disease-causing organism in a food, beverage or feedstuff." 

The DIOSE contends that our food safety standards would not be 
in jeopardy under these requirements because any determination that 
a food poses a health risk would be made on scientific grounds and 
would comport with the definition of risk assessment in NAFTA. 

Three examples elucidate other plausible constructions of 
these restrictions. The first is the Delaney Clause, which is the 
result of a congressional determination made more than 30 years ago 
that carcinogens should not be introduced into the food supply in 
the face of their uncertain effects on human health. Industry 
groups attack the scientific basis for the Delaney Clause as 
outmoded, and other countries have criticized the Delaney Clause as 
an unfair trade barrier. 

Second, California voters adopted a referendum in 1986, called 
Proposition 65, which prohibits knowingly and intentionally 
exposing anyone to chemicals that are listed by the State of 
California as causing cancer or reproductive toxic effects without 
providing a clear and reasonable warning. As a popular referendum, 
Proposition 65 may be vulnerable to claims that it was not "based 
on scientific principles." Article 712(3) (a) . Moreover, a warning 
must be provided on a food containing a carcinogen even if the path 
of exposure for which the cancer effect has been shown is 
different, e.g. . inhalation. 

Third, the European Community imposed a ban on imports of 
hormone-treated beef effective one year after its 1988 ban on the 
use of hormones in EC beef production. The United States claimed 
that the ban, which followed a European Community ban on the use of 



169 



hormones, lacked scientific support and thus was a disguised 
restraint on trade. Wisconsin and Minnesota have also banned milk 
treated with hormones. 

If a standard is based on a theorem that has not been 
supported by data or scientific information, it could be 
vulnerable. For example, FDA took certain plastic bottles off the 
market because it assumed that carcinogens in the bottles would 
migrate into the food. 



BOSTON PUBLIC LIBRARY 




170 3 9999 05982 484 5 



V. LEVEL OF PROTECTION 

NAFTA generally allows each country to choose the levels of 
protection it wants to provide. There are a few limitations. 

In establishing food safety levels of protection, a country 

(a) should take into account the objective of minimizing 
negative trade effects; and 

(b) shall , with the objective of achieving consistency in 
such levels, avoid arbitrary or unjustifiable 
distinctions in such levels in different circumstances, 
where such distinction result in arbitrary or 
unjustifiable discrimination against a good of another 
Party or constitute a disguised restriction on trade 
between the Parties. 

Technical standards should comply with the same mandate. Article 
907(2). 

There is little consistency in the levels of protection 
provided by U.S. standards dealing with various exposures to 
pesticides, let alone those dealing with pesticides on the one 
hand, food additives, microbiological contamination, and food 
irradiation on the other, particularly when state standards are 
part of the calculus. The same is true with technical standards 
addressing such diverse matters as recycling, air bags, heart 
valves, prescription drugs, products containing ozone-depleting 
chemicals, hazardous shipments, and toxic chemical bans. These 
distinctions may result more from their different historical or 
political origins than rationale policymaking, and thus may have a 
disproportionate impact on some imports, which exporters will 
surely claim is unjustifiable. If such arguments are successful, 
the latitude NAFTA gives countries in setting their levels of 
protection will be seriously constrained. 



171 



VI. NAFTA' S EFFECT ON 8TATE LAWS 

Two related issues arise in determining the effect of a trade 
agreement on state laws. The first issue concerns the United 
States obligations as a matter of international law under the trade 
agreement itself. 

Under GATT, which requires a country to "take such reasonable 
measures as may be available to it to ensure observance of the 
provisions of this Agreement by the regional and local governments 
and authorities within its territory," Article XXIV, countries are 
generally agreed to have an obligation to prevent local laws or 
actions that violate GATT. J. Jackson, World Trade and the Law of 
GATT 116 (1969). Scholars and state courts have also treated GATT 
as having preemptive effect over state laws under the Supremacy 
Clause. Hudec, "The Legal Status of GATT in the Domestic Law of 
the United States, in The European Community and GATT . at 199 
(Hilf. et al., eds., 1986); state court cites. A recent GATT panel 
construed Article XXIV to permit only those state and local laws 
"which the central government cannot control because they fall 
outside its jurisdiction under the constitutional distribution of 
powers . " Beer II at 97 . 

NAFTA has at least as strong an effect on state laws. Thus, 
Article 105, which applies to food safety standards, provides that: 

The Parties shall ensure that all necessary measures are 
taken in order to give effect to the provisions of this 
Agreement, including their observance, except as 
otherwise provided in this Agreement, by state and 
provincial governments. 

With respect to other standards, the parties "shall seek, through 
appropriate measures, to ensure observance" by state and provincial 
governments. Article 902(2). Moreover, certain standards 
obligations are explicitly spelled out for state governments. See . 
e.g. . Article 301(2) (requiring states to provide imported goods no 
less favorable treatment than the most favorable treatment accorded 
to any like or directly competitive or substitutable good) . Both 
of these provisions appear to require the federal government to 
take significant steps to ensure compliance with the Agreement by 
state and local governments, perhaps all steps within its 
constitutional power, in keeping with Beer II . 

While NAFTA* s terms dictate the federal government's 
obligations as a matter of international law, they do not prescribe 
the effect that NAFTA has as a matter of U.S. law. That effect is 
determined by a trade agreement's implementing legislation. Under 
the legislation implementing USCFTA, which has state law effect 
language identical to NAFTA 's Article 105, makes it clear that the 
Agreement prevails over any conflicting state law. Pub. L. No. 
100-449, S 102(b)(1)(A), (B) , in 19 U.S.C. S 2112 note. Moreover, 
that legislation authorizes the federal government to bring an 
action challenging state laws or applications of state laws that 



172 



conflict with the Agreement. Id.. § 102(b)(3). 

The NAFTA implementing legislation could be expected to have 
the same implementing legislation provisions, in fact, given the 
history under USCFTA, Mexico and Canada might have a reasonable 
expectation that the federal government would have same authority 
that it has under the same state law effect language in the USCFTA. 

Faced with the prospect of federal lawsuits to enforce NAFTA, 
the Governor of California has objected to such implementing 
authority. He contends that compliance with NAFTA obligations and 
decisions of dispute settlement panels should be left to the 
political process, as it is in the federal system, rather than 
transplanting it to the courts. Letter to Ambassador Kantor from 
Governor Wilson (date) . 

It should be pointed out that the USCFTA implementing 
legislation authorizes lawsuits by the federal government but not 
be private parties to enforce USCFTA against states. As a 
practical matter, however, it may be impossible to prevent state 
courts from considering nafta's effect on the viability of state 
laws in private litigation. Indeed, state courts have treated GATT 
as preemptive even without a statute giving it that effect. Cites. 

Whatever the precise terms of the NAFTA implementing 
legislation, it cannot prevent trade challenges being lodged 
against state laws. See Beer II ; Puerto Rican Milk Dispute. 
Rather, it will determine whether disputes will be resolved 
domestically through political processes or through judicial 
mandates. 



o 



75-934 (176) 



ISBN 0-16-043587-0 




9 780160"435874 



90000